Zacks Investment Management

As we adjust to the new year, now is the perfect time for investors to keep an eye on key factors that could impact the market for the next 12 months. In today’s Steady Investor, we take look at three investment themes to consider for 2021:

• China’s economic growth in 2020
• Federal budget deficits swell
• 10-year U.S. Treasury yield rises

One Major Country Posted Economic Growth in 2020 – It was China. The country’s strict national lockdowns and travel restrictions squashed the virus in a matter of months, and the economic engine was flipped back on by summer. While the rest of the world reeled from the spread of Covid-19 pandemic, China was expanding its role in global trade and strengthened its position as the world’s factory headquarters. China’s exports hit a record $2.6 trillion in 2020. China also pushed further into the global financial markets, by accounting for a record share of IPOs and secondary listings last year – driving major capital inflows into stocks and bonds. In all, China’s 2020 GDP accounted for 16.8% of total global GDP, which is up from 14.2% just four years ago. Meanwhile, it is estimated that the U.S. contributed 22.2% of global GDP, which is flat from 2016 levels.¹

___________________________________________________________________________

Plan Your Retirement Without Making Investment Mistakes

Many investors may be wondering how to prepare for what’s to come, especially when it comes to retirement planning. Feeling uncertain is normal, but making rapid decisions due to uncertainty could lead to a snowfall of mistakes for investors who don’t take their time when planning their future.

While there are many unknowns at present, we believe there are nine common mistakes that many investors make when planning for retirement. In our guide, 9 Retirement Mistakes to Avoid, we outline these mistakes and how you can potentially avoid them.
 
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:

Learn About the 9 Retirement Mistakes to Avoid!²

___________________________________________________________________________

Federal Budget Deficits Swell, and are Likely to Get Bigger – From October to December, which marks the first three months of the federal government’s fiscal year, the budget deficit swelled by 61%. The growing deficit was predictable – the federal government continues to spend in an effort to stabilize the economy, and the new $900 billion in fiscal stimulus sets the stage for even higher outlays. Meanwhile, with many businesses posting lighter earnings and the number of unemployed Americans remaining elevated, tax receipts are materially lower – hence the budget gap. Indeed, for the 12 months ending December 31, the federal government ran a $3.3 trillion deficit, or approximately 15.8% of GDP. As you can see in the chart below, total federal spending (blue line), has far outpaced total federal receipts during over the last year.³

The U.S. Budget Deficit Soared in 2020

Source: Federal Reserve Bank of St. Louis⁴

Eyeing U.S. 10-Year Treasury Bond Yields – The 10-year U.S. Treasury yield has been rising of late, crossing 1% for the first time since March 2019. One of the forces driving 10-year Treasury yields higher is expected inflation. The Fed’s balance sheet expansion has in large part been to finance business loans (PPP and Main Street Lending), direct payments to Americans, and expanding unemployment benefits. These dollars are not being parked in bank reserves – they are being directly transferred into the real economy. President-elect Biden has also stated that more stimulus is on the way, and the 50/50 split in the Senate should make another short-term spending package all but assured. The end result is that the M2 money supply is rising at an unprecedented 25% year-over-year rate, which is much faster than during the inflationary period of the 1970s. It makes sense, in our view, that 10-year U.S. Treasuries would be ticking higher as a result. We expect this trend to continue in 2021.⁵

Source: Federal Reserve Bank of St. Louis⁶

Avoid Making Mistakes During Retirement Planning – In times like these, there are common mistakes that investors make while planning retirement – like forgetting to take a diversified approach. We believe that there are strategies that investors can use to help guide their investments to succeed in the long term. To help you understand some of these mistakes and how to avoid them, we have created the guide, “9 Retirement Mistakes to Avoid.”⁷
 
In this guide, we provide our thoughts on what we believe are nine of the biggest retirement mistakes investors should avoid. If you have $500,000 or more to invest and want to learn more, click on the link below:

Disclosure