Weekly Investment Strategy


Key Takeaways

  • Rescue package isn’t the one & only deal expected
  • Still smitten with emerging market equities
  • The health care sector still has our heart

Happy (Early) Valentine’s Day! Given that the COVID-19 pandemic has caused the loss of nearly a half million loved ones in the United States alone, I feel more grateful than ever for my four valentines—my wonderful wife and three amazing daughters. I hope that whether you celebrate with cards, chocolate, or flowers, that you’re able to spend the holiday with the ones you most care about. While red may be the color of the day, it is a color that investors are hoping not to see for any asset classes in the year ahead. However, just as in a healthy relationship, we cannot take the improving COVID-19 trends for granted and become complacent about the future returns we expect to come our way. That is why we ‘wear our hearts on our sleeves’ and continuously provide investors with timely, thoughtful insights. Looking at some of the developments so far this year, we’ll review a few key components of our economic and financial market outlook without ‘rose-colored glasses.’

  • Removing The COVID-19 Thorns From The US Economy | Roses are red, violets are blue, US economic growth is bound to breakthrough! After suffering its worst year of economic growth since 1946 (2020 Annual GDP growth: -3.5%), the US economy is forecasted to post its best year since 2000 (est. 2021 annual GDP growth: 4.0%). This 7.5 percentage point swing would not only mark the largest rebound in growth on record, but would also bring GDP back above pre-pandemic levels. But in the near term, until herd immunity can be reached, there may still be a few ‘heartbreaking’ moments for certain industries and sectors as consumer behavior is still impacted. According to Bloomberg, less than 25% of consumers plan to enjoy an evening out to dinner this Valentine’s Day. The lowest percentage in the survey’s history translates to $1.5 billion less in spending. While consumers splurging less on their ‘sweethearts’ is just one example of shifting consumer behavior, the cumulative impact of such behaviors will continue to have a near-term impact. Our much ‘rosier’ outlook for the long term is supported by action on both the policymaker and vaccine fronts. The Federal Reserve has signaled it will remain on hold through 2023, the Biden administration has proposed a rescue fiscal package (with hopes of a recovery package later this year), and the pace of inoculation has drastically improved (~1.5 million daily). With these supports in place, the US economy should be able to distance itself from the darkest days of the pandemic and be poised for a strong, consumer-driven rebound in the second half of the year.