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article imageA medical solution for stock markets: What's the cure for 2021? Special

By Tim Sandle     Feb 15, 2021 in Business
The economic situation in 2020 was chaotic. What can we expect in 2021 now that vaccines are being rolled out? Is there a similar economic injection in store for financial markets? A NASDAQ executive probes the situation.
To gain insight into how stock markets will develop across the course of 2021, Digital Journal caught up with Steve Wyett, the Chief Investment Strategist for BOK Financial (NASDAQ: BOKF).
Digital Journal: What is your prediction for the market for 2021?
Steve Wyett: Getting beyond some of the shorter term market influences, our outlook for 2021 is optimistic. Three main factors provide this optimism. These are:
Vaccines turning into vaccinations
Finding and implementing a solution to the medical problem of COVID-19 is the primary determinant for the economy going forward. As more people are vaccinated and we can see an increase in our mobility (an ability to travel, eat out, attend events, etc.), we expect economic growth to be healthy and for the employment market to improve dramatically. This will lead to greater economic growth and corporate profitability, which will provide the basis for equities to continue to outperform bonds over the course of the year.
It will not be a straight line, and an equity correction can happen at any time, but absent a significant slow-down in overcoming COVID-19, our outlook is positive. Of course, if we see a new variant of the virus that is more transmissible, more deadly or resistant to our current crop of vaccines, we would have to reassess our outlook.
Ongoing monetary accommodation
Federal Reserve Chair Powell has been clear and consistent with the message from the Federal Reserve. While the economy is healing and the worst of the economic decline appears to be behind us, there is still much healing to be done. Specifically, looking at the Fed's two primary mandates, full employment and price stability, the data shows why interest rates will remain low and additional measures, like quantitative easing, will remain in place. There are still close to 10 million fewer jobs in our economy than when the pandemic started. That, along with the Fed's inflation measures still showing core rates of less than 2 percent, means we expect the Federal Reserve to remain accommodative throughout this year and probably longer.
Ongoing fiscal accommodation
U.S. Congress is working on an additional stimulus plan to provide money to individuals, companies, and state and local governments. While the final amount is not known, taken in addition to the almost $3 trillion in stimulus passed last year, we expect this action to provide a strong tailwind to growth throughout 2021.
DJ: Are you optimistic overall?
Wyett: Having said that, it would seem unlikely the stock market specifically can match the returns seen the last two years. The economy and corporate earnings will, in all likelihood, outperform the stock market, but positive gains are still expected for the year.
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