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2020 is in the books. Global equities ended the year near all time highs. Bonds, across a wide range of maturities, traded strongly on the year.
As 2021 begins, there is hope that countries around the globe will wrestle COVID into submission during the new year. Some businesses have proven their resiliency in the face of the challenges of 2020. Clearly, some of that resiliency was due to fiscal and monetary support by governments around the world. Markets are trading under the assumption that significant government support will continue. This appears to be a reasonable assumption until evidence proves otherwise. If indeed it is the case that a government backstop is in place, equities could move higher even in the face of historically pricy valuations. Should the tide roll out, be prepared for company fundamentals to shift back into focus in regard to equity pricing. In regard to bonds, the situation is slightly more tenuous. Rates have little room to move lower as rates are essentially stuck at the lower bounds. At present, it is hard to justify new purchases in bond indices due to valuations. It may be prudent to look for price dips in the bond complex to achieve rebalancing.
Looking forward to a prosperous and profitable 2021.
Best
Cory Haupt
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