My thoughts on 2020 & 2021
We will not forget 2020
No one started the year thinking a pandemic would shut down the world before spring. But this is where we were. In the last 12 months we saw the entire world change. It's hard to believe that in March, April and May, the entire world was locked down.
However, the investment world had a different view. The markets bottomed in March, only deliver a record performance in 2020. The S&P 500 closed 16% for the year. If you closed your eyes and invested, you wouldn’t have known a pandemic happened.
In this year's market review I will discuss my thoughts on 2020, the Covid vaccine and what’s in store for 2021.
Covid took our breath away
Several years ago Bill Gates had mentioned the concern of a widespread disease. We haven't seen one impact multiple countries at the same time in many years. We were never ready for the next outbreak.
It all began in China
In November 2019, we received the first signs of an outbreak in Wuhan. The problem although was we didn't know what to expect. Diseases and outbreaks happen all over the world, all the time. But with China being the center of international trade, it's possible the wrong outbreak can spread quickly throughout the world.
By February 2020 we had already begun to see the first signs of the pandemic. This was tough to take in because the country has never experienced such an outbreak before. Yes we've had other diseases in the past 20 years but nothing that spreads this fast while killing so many people. I remember being in New York the first week of March and hearing the possibility of a 24-hour lockdown. No one had any idea this could last more than 24 weeks.
Go get vaccinated
Our country is still in lockdown mode. But we have a vaccine now. This is the first time delivery of a vaccine happened at the same time as its development. This allowed us to distribute the vaccine across the country in record time.
I've met several healthcare workers that have received the Covid vaccine. This vaccination reduces the chance of severe symptoms. Even if you are at low risk. I think the Covid vaccine will be similar to getting the flu shot in the future.
However, the challenge today is to have everyone vaccinated. There's a possibility more than 20% of the population will not get the vaccine for a variety of reasons. The vaccination will reduce the viral spread but wont kill Covid.
The Last-minute Stimulus that Saved America
Small businesses were saved
The virus almost bankrupted small business America. There was no way for retailers to protect against a total loss of revenue. Many small businesses lost 100% of their revenue for several months. Many companies in New York for example have not recovered at all. This has also been a record year for bankruptcies in the energy and retail industries. But we're not done yet.
The first two trillion dollar stimulus plan saved millions of people's lives back in March. It provided fast cash for the unemployed, loans for small businesses and local governments. I don't think any other country could have pulled off the stimulus package at this size in less than 30 days. I’m still impressed by this feat from our government.
But one trillion dollars wasn’t enough
The speed of delivery had its own gaps. First the timeline to forgive loans was extended from 8 to 24 weeks. But lockdowns continued in major cities. Small business owners were helpless when the streets became empty. Fortunately the second stimulus package was approved in late December to extend unemployment benefits and business loans.
Election was the Outcome of a tough year
President Trump had a difficult job carrying us through the pandemic in his final months. This has not been an easy year for politicians or businessmen. It's hard to believe how much volatility we endured 6 months before the elections.
The vaccine decided the election
Yes, the vaccine was prepared months before the election. But I don't think the big Pharma companies wanted to get involved with politics. For example Pfizer didn't accept government money for research and development for the Covid vaccine. This is a good example of dividing church and state. However, if the vaccine was released before November, the Presidential outcome would have been very different.
Expect low growth during the Biden term
The Biden Administration may not be as friendly to businesses. The Democratic Party is known to spend more money and increase taxes. I suspect a lot of changes will take place after Biden takes his role. First we'll see a lot more stimulus plans, increasing our federal balance with more debt. Next, taxes will increase making it less competitive for businesses to operate in the US. Then Biden's team will reverse the progress made from the last administration. This will stunt growth for the next four years.
My outlook for 2021
This will be a turnaround year for the global economy. We've never experienced a forced recession in recent times. This is an opportunity to rebuild the gaps in America.
The roaring 20s has begun
I believe this is the beginning of a new decade. There is a lot of pent-up demand sitting at home. Once the lockdowns are over I suspect travel will be the first industry to come back. There's a lot of upside in the hospitality industry.
First, many travel businesses had zero revenue for several months in 2020. Plus we forget how much consumers and businesses traveled pre-pandemic. Hotels and airplanes will be packed in a post-vaccine world. It may take a few months but the economy will reopen again.
The Political Landscape will Change
Our Administration will feel Presidential. There will be less noise in the news about movements in the White House going forward. This will help refocus the media’s efforts on more important matters.
Like Paul Graham mentioned, the change in Administration will be like saving 15% of your mental RAM. You can spend more energy focusing on bigger problems. I think an interesting idea would be to focus more policies on the bottom 50% of America. we are the only country with the economic tools capable of this. Improving the lives of 100 million Americans will amplify our output tenfold. It will be a clear competitive advantage if no Americans lived in poverty. Other developing countries wont have the same luxury.
A new social media app will rise
Last year we watched Tik Tok become the most popular social media app. It was front and center with politics and China. First, President Trump was attempting the largest political M&A deal in history. But nothing came of it except free publicity for TikTok. Over 5 billion downloads, making it a dominant social media platform.
However, now is the time for a more interactive shopping platform. Old mobile apps didn't have an e-commerce feature. We saw Instagram deliver a new shopping feature but it hasn't picked up as expected. I think we need a more engaging platform. This will involve a branded deal with a celebrity or major consumer brand. For example, Mr. Beast did this with Cloud kitchens last month with his burgers.
We are at an inflection point in ecommerce. 2020 showed it is possible to go 100% online. Now 2021 will make it permanent.