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Today's big stories

We cast our minds back to the major economic trends that defined the year
TS Lombard thinks the global recovery will influence the Federal Reserve’s interest rate (and your portfolio) sooner than markets think – Read Now
We looked back at how the markets were shaped by wider economic trends

Grave New World

What’s Going On Here?

This was the year the entire economic universe revolved around the astronomical effects of one microscopic virus.

What Does This Mean?

When coronavirus first broke out in China, economists’ first worry was that it would disrupt the global supply of goods. If all those “made in China”-labeled products weren’t being made in China, after all, global growth might falter. They needn’t have worried: a drop in supply isn’t exactly an issue if there’s a collapse in demand too. With the virus locking the whole world down soon enough, shoppers suddenly weren’t buying their usual products any more – and the global economy took a nosedive.

Enter the world’s central banks and governments, which promised to do whatever it took to cushion the blow. Central banks’ support came in the form of interest rate cuts and bond-buying programs, both of which aimed to encourage businesses and individuals to borrow – and then spend – more money. Governments, meanwhile, slashed taxes, while also handing out relief payments to anyone who was forced out of work.

Why Should I Care?

For markets: Everybody hurts.
The pandemic’s spread has had a massive impact on the job market. While the US unemployment rate has more than halved since the first coronavirus wave hit in spring, there are still ten million more Americans looking for work than there were before the outbreak. And since workers are the building blocks of an economy, a dwindling number of them risks economic growth next year and beyond.

The bigger picture: A long road to recovery.
At the height of the first wave this spring, the US economy shrank by a record 33% annualized rate in the second quarter, the eurozone by a comparable 36%, and the UK by 60%. And even with vaccines now in play, the IMF reckons it’ll take the whole of 2021 for the global economy to bounce back to pre-pandemic levels.

You might also like: How to make your own predictions for 2021.

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2. Analyst Take

What Investors Are Getting Wrong About Interest Rates

What’s Going On Here?

The coronavirus vaccine is underway, and things should slowly but steadily get back to normal from here.

But a “back-to-normal” economy will force the Fed to get interest rates back to normal too – which means bringing them back up from their near-zero levels.

And while the market thinks won’t happen for nearly four years, Steve Blitz, chief US economist at TS Lombard, thinks it’ll happen a lot sooner.

That matters: Fed interest rates are arguably the most important single number in the global economy, and they effectively set the rate at which your investments are priced.

So that’s today’s Insight: what a sooner-than-expected interest rate raise means for you, and what you can do to prepare your portfolio for the shift.

Read or listen to the Insight here

💪Be ready to take on 2021

If this year’s proved anything, it’s that you never know what’s around the corner. But at least with Schwab, you’ll keep calm when markets are volatile.

Because let’s face it, we’re not out of the woods yet: volatility’s still likely as we head into 2021, with countries still dealing with the pandemic and new governments coming into play.

That’s why it’s useful to know you’ll have access to Schwab’s advanced trading platform, custom screeners, and free proprietary research that’ll help you identify your next smart move.

Learn More

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Ifs, Ands, And Bets

What’s Going On Here?

As governments and central banks scrambled to manage their economies, investors were just scrambling to place a wager on record-breaking global stock and bond markets.

What Does This Mean?

Global stocks had a scare when Covid-19 first hit, falling more than 20% from their previous high into a “bear market”. But they bounced back with a vengeance when tech stocks – which account for roughly a quarter of the US stock market – got a boost from pandemic-driven trends like remote working and online shopping. By the end of the year, Chinese stocks were up roughly 25% and US stocks were up 15% – while tellingly, Europe’s less tech-heavy markets were down 5%.

Bonds had a good year too: their prices climbed and yields dropped as central banks bought them up in their droves. So much so, in fact, that a record $18 trillion of government and corporate bonds offered negative yields by the end of the year. In other words, investors wanted them even though they were guaranteed to lose them money…

Why Should I Care?

For markets: Whose high is it anyway?
No sooner have investors digested today’s goings-on than they try to put a price on next year’s potential, which might partly explain stock markets’ recent record highs. 2021, after all, should be ripe for a dramatic bounce back: analysts are expecting average US company profits to grow by 22% – which, if proved right, would be the highest profit growth on record since 2010 (tweet this).

The bigger picture: The big rotation.
There was a lot of debate this year around when cheap-looking “value” stocks – in bruised sectors like cars, energy, and banking – would overtake “growth” stocks like those of Big Tech. And the widespread rollout of the vaccine could be that “when”: it’s already given investors more confidence in a growth rebound next year, which has historically been most beneficial to economically sensitive value stocks.

You might also like: How to bet on China’s ongoing stock market success.

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💬 Quote of the day

“Life is too deep for words, so don’t try to describe it. Just live it.”

– C.S. Lewis (an Irish writer)

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🤜🤛You’ve got a friend in Schwab

There may be plenty of ups and downs still to come in 2021, but Schwab helps you prepare for them all.

You’ll work with their trading specialists to explore new opportunities. You’ll team up with their options and futures specialists to build new strategies and put them into action. And you’ll unlock fresh and actionable perspectives with Schwab Live Daily.

And you can even get started with $0 online stock, ETF, and base options commissions, plus $0.65 per options contract. Get all of this and a Satisfaction Guarantee when you join Schwab today.

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🍻 Look back at 2020 with our analysts

They say if you don’t know where you’ve come from, you don’t know where you’re going.

So what better way to make sure you’re firing on all cylinders next year than to catch up with our analysts on the major market trends, highlights, and lessons of 2020?

In part one of our two-part series, the team looks back at how coronavirus quickly morphed from a supply-side economic disruption into a demand-side problem, how central banks and governments tried to fight it, and the bizarre set of circumstances that drove oil’s price into negative territory.

In part two, you’ll hear about the year’s big winners and losers – including tech companies, consumer staples, and energy firms – and why mergers and acquisitions, IPOs, and the amount of money raised by SPACs broke records in the second half of the year.

It’s a doozy: check it out.

Listen Now

📚 What we're reading

The year live music shut for business (Pitchfork)
The year time lost all meaning (Vice)
The year sidewalks became a drag (Grub Street)

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Finimize - 😷 Remind me what just happened?

Today's big stories

Grave New World

What’s Going On Here?

What Does This Mean?

Why Should I Care?

What Investors Are Getting Wrong About Interest Rates

💪Be ready to take on 2021

Ifs, Ands, And Bets

What’s Going On Here?

What Does This Mean?

Why Should I Care?

🤜🤛You’ve got a friend in Schwab

🍻 Look back at 2020 with our analysts

Older messages

😱 IPOs really are canceled

🚗 Apple runs Google off the road

🤫 Don't worry about Tesla

🎄 SMIC's nightmare before Christmas

🤞 Let's try this again: EU destroys Big Tech

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