Before we go into 2021, lets recap 2020, the year of the coronavirus pandemic. We started the year with optimism and momentum following a strong 2019 which included a 31% return on the S&P 500.

This positive sentiment helped the markets achieve a new all-time high by February, as the DOW was teetered on the edge of 30,000. Then, news of the coronavirus pandemic started to unfold as the virus spread across the world, and as that happened the markets began to tumble.

March was unprecedented as the Dow shed 11,000 points and the index closed the month around 18,000 as the consequences of the pandemic set in. The low was recorded on March 23 and for those investors who bailed out as the markets shed 30% were to be punished rather quickly.

In early April confidence began to return thanks to the Federal Reserve announcing plans to support the US economy. This helped spark one of the few highlights of 2020, a V-shaped recovery powered by zero rates through 2023 and big asset purchases which helped bring stability to the markets.

Despite trying to navigate around the virus and prop up the US economy investors couldn’t put a foot wrong in the markets through the Summer as vaccine and stimulus talks, combined with a wave of new investors sent stocks back up to pre-Covid levels.

As Summer ended Congress passed stimulus bill number one which meant US individuals and businesses received the support they very well needed, and investor focus then quickly shifted to preparing for a historic presidential election.

It was at this point we began to see the disconnection between the economy and the markets as the ‘haves’ and ‘have nots’ made themselves known. Clearly the ‘haves’ include companies focused on technology, artificial intelligence, and cloud computing, as they will inevitably benefit from this permanent shift to a remote economy.

A five-year transformation happened in the space of six months and despite the catalyst of this ultimately forcing our hand, it was clear this innovation was ready to step into the limelight.

Now, here we are as a society having to innovate again to get rid of the virus, with scientists being put to the test in search of a vaccine, and luckily, they have been able to pull it off. This entire year companies have been challenged in one way or another and have been forced to pivot which has ignited quicker and more dynamic innovation.

Despite all of this we cannot forget the pain felt by so many throughout the year as they either lost loved ones to Covid-19 or been negatively affected by the pandemic in some way. However, as far as the economy and markets are concerned this will be a turning point in the way we do business, and we believe we are forever changed.

Now, looking forward I do believe that innovation will continue to run large, especially in healthcare and biotech as money flows into gene-editing and vaccinations.

A second area I believe will benefit from this new economy is energy storage, as electric and renewable energy companies step up providing batteries that run for longer periods of time.

Thirdly, the combination of robotics and artificial intelligence are poised for a stellar 2021, as human interaction remains minimal companies are looking for alternatives, robotics and an online business presence are solutions to this.

We are able to undergo all this digital transformation thanks to the capability of online transactions, and this brings me to my final investment theme of 2021, blockchain and digital currencies. The likes of PayPal now allow customers to use cryptocurrencies on their platform and with institutions piling into Bitcoin it is a big year for the digital dollar.

These investment themes all present risk as they are the ‘new frontier’ and ultimately the future of our economy.

It is an exciting time to be an investor as we look forward to what will be an eventful 2021, I discussed this during an interview on WABC Radio’s Money Matters show with Gary Goldberg over the weekend click here to listen.

Finally, I will be discussing the opportunities 2021 presents and my outlook for the markets and economy further on Fox Business with Maria Bartiromo on New Year’s Eve, make sure to tune in from 7am on Thursday morning.

© Mahoney Asset Management

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