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KNOCK, KNOCK WHO'S THERE? MILLIONAIRE STATUS By: Collin Flannagan |
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Current Market outlook (Updated:1/12/201)
The S&P 500 finished up 16.26% over 2020 despite it's rocky start. I believe this was due to a many factors, but mainly due to the Federal Reserve lowering rates to near 0%, retirees acceptance to remain in the market instead of holding majority bonds as they historically have had to do, and due to an increased popularity in investing from younger individuals. I believe all 3 of these major factors will also hold throughout 2021 and we will see another 10%+ year in the S&P 500.
Predictions over next 5-years:
*The Federal Government and Federal Reserve will continue to prop up the economy with business-friendly policies.
*Large corporations will continue to outperform due to low-borrowing rates and pricing power over smaller institutions. Additionally, large corporations will continue to purchase smaller companies and continue stock buyback programs.
*Retail, travel, and oil sectors will continue to under-perform due to more people working from home, people’s timidness to crowds, and people’s online presence continuing to grow.
*Inflation will increase to 2-4% over the next few years due to Federal Reserve policies and Federal Government stimulus. (Unlike in 2008 where the Federal Reserve bolstered mainly the banking sector, this round of monetary policy is more likely to cause an inflationary reaction due to its widespread reach.)
*Companies will increase their U.S. manufacturing output to improve their U.S. supply chain in an effort to be less reliant on foreign imports and due to potential government incentives. This will cause inflation since producing in the U.S. is typically more costly due to increased labor costs.
*Since there has been an increased focus on lower income workers during Covid, I predict an increase to the minimum wage in some areas or across the United States. This will increase the cost of labor for businesses, which would cause higher inflation.
Summary:
*U.S. markets and large international corporations will continue to have a high annual investment return.
*Inflation will likely increase over the next few years to 2-4%, which will increase the cost of borrowing for businesses and also for home mortgages.
P.S. I can't see the future, but stay calm even if we see a second Covid market correction. Stay invested for the long-run.
Predictions over next 5-years:
*The Federal Government and Federal Reserve will continue to prop up the economy with business-friendly policies.
*Large corporations will continue to outperform due to low-borrowing rates and pricing power over smaller institutions. Additionally, large corporations will continue to purchase smaller companies and continue stock buyback programs.
*Retail, travel, and oil sectors will continue to under-perform due to more people working from home, people’s timidness to crowds, and people’s online presence continuing to grow.
*Inflation will increase to 2-4% over the next few years due to Federal Reserve policies and Federal Government stimulus. (Unlike in 2008 where the Federal Reserve bolstered mainly the banking sector, this round of monetary policy is more likely to cause an inflationary reaction due to its widespread reach.)
*Companies will increase their U.S. manufacturing output to improve their U.S. supply chain in an effort to be less reliant on foreign imports and due to potential government incentives. This will cause inflation since producing in the U.S. is typically more costly due to increased labor costs.
*Since there has been an increased focus on lower income workers during Covid, I predict an increase to the minimum wage in some areas or across the United States. This will increase the cost of labor for businesses, which would cause higher inflation.
Summary:
*U.S. markets and large international corporations will continue to have a high annual investment return.
*Inflation will likely increase over the next few years to 2-4%, which will increase the cost of borrowing for businesses and also for home mortgages.
P.S. I can't see the future, but stay calm even if we see a second Covid market correction. Stay invested for the long-run.
