Zacks Investment Management

In today’s Steady Investor, we take a look at key factors that we believe are currently impacting the market, such as:

• Increased vaccine availability by May?
• Are inflation worries overblown?
• Nasdaq flirts with correction territory
• Consumers have saved trillions during the pandemic. Are they poised to spend it?

Vaccinated by May? The Biden administration announced this week that there would be enough vaccines available for all American adults by the end of May. This announcement marked a significant shift in expectations, and offered more than a glimmer of hope about when the pandemic risk could be stamped out. Part of the accelerated timeline came as the FDA authorized the Johnson & Johnson vaccine for distribution, and as the government brokered a deal between Johnson & Johnson and Merck – who are otherwise competitors – to work together on production. Around the same time, Pfizer and Moderna announced they would be increasing production, which also contributed to the May timeframe.¹

Are Inflation Worries Overblown? Inflation has been a buzzword in 2021, with many economists and pundits increasingly calling for rising prices in the coming years. With yields on the 10- and 30-year U.S. Treasury bonds on the rise, it seems the market is also starting to price-in higher inflation expectations down the road. While higher inflation in 2021 and beyond is certainly a possibility, it is not a foregone conclusion. Other conditions that tend to spur higher inflation – such as tight job markets and a lack of spare capacity in the economy – are currently missing. It is also worth noting that as the chorus for higher inflation grows and more people call for it, there’s a falling likelihood of inflation arriving when everyone expects it to (in our view). As mentioned, inflation could be an issue in 2021 and beyond. But our view is that inflation’s arrival is not likely to be sudden, and it seems very unlikely to happen as most expect. What’s more, the Fed has already made it clear that they would like to see inflation run above the 2% target for some time, drawing a contrast to a decade of low growth and low inflation.²

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Do You Have a Strategy to Protect Your Retirement Assets!

Whether you’re in the beginning of planning your retirement or already on the path to building a successful retirement – it’s important to make sure your investments are protected at all times. Factors, like the vaccine becoming available to more Americans in May and other uncertainties could affect the market. How can investors protect their retirement assets against life’s unknowns?

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• The importance of flexible portfolio allocation
• Why keeping some liquid assets can potentially help you preserve more wealth
• Understanding your risk tolerance in case of a market downturn
• Plus, more strategies to help you protect your retirement assets

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Nasdaq Flirts with Correction Territory – Technology stocks in particular have been under pressure recently, as interest rates have been ticking higher. There seems to be a fairly tight correlation happening in the capital markets: as U.S. Treasury bond yields rise, high valuation stocks – especially those in the tech-heavy Nasdaq – have come under selling pressure. The reason for this dynamic is that as interest rates rise, stocks are arguably no longer the ‘only game in town.’ Investors fear that a shrinking risk premium – which is the difference between the yield on stocks and the risk-free yield on Treasuries – makes stocks less attractive relative to bonds. It follows that the first dominoes to fall are the priciest stocks, many of which can be found in the Nasdaq.⁴

Consumers Have Saved Trillions. Are They Poised to Spend It? Fiscal stimulus and direct government payments has not only been a U.S. thing – developed countries across the world have doled out payments directly to businesses and households. So much so, research estimates $2.9 trillion in savings have been accumulated by households since the beginning of the pandemic, $1.5 trillion of which is held here in the United States. The question for the balance of 2021 is: where will this cash go? In our view, American households are not likely to sit on this cash indefinitely, and once the economy opens back up, we think the stage is set for a boom in spending. A recent Deutsche Bank study also found that retail investors plan to invest one-third of any future stimulus checks in the market. Which, based on current estimates for the next stimulus, could mean approximately $180 billion of inflows into the equity markets.⁵  

With so many of these unknowns surrounding the market and economy, there is no way to predict the direction that the market will be headed in the future. To help you prepare your retirement for the market’s uncertainties, we recommend finding a retirement strategy that takes these “what ifs” into account. Our free guide can help you to prepare for what’s to come as you look to 2021!

If you have $500,000 or more to invest, get our free guide, How Solid Is Your Retirement Strategy.⁶ You’ll get valuable and practical ideas to help build a “weatherproof” retirement strategy that can potentially protect your retirement nest egg from any storm that could threaten your financial security.

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