Riding on the positive sentiment of the worldwide vaccine deployment and improving outlook in 2021, US markets extended gains, the S&P 500, the NASDAQ, and the Dow rose 3.71%, 5.65%, and 3.27% over the last month in 2020 respectively.
On the epidemic front, situation remains troubling. Daily infection figures in numerous states continued to climb, lockdown measures remained in place in most locations throughout the traditional high season of Christmas and New Year, which is expected to put businesses in a tight spot heading into the New Year. Fundamentals showed weakness, as jobless claims stay on the higher end and services PMIs ended its uptrend, yet market have looked past economic figures in the short term, with eyes on the way out for the COVID crisis.
According to government estimates, the country should be able to rollout the majority of the vaccinations by summer, which could imply a complete recovery by end of 2021 Q2. Together with further stimulus plans, this should provide sufficient basis for a positive year. Sectors that are set to gain from the administration change, such as companies involved in innovation and sustainability, should see even better returns. As valuations were on the expensive side at year end, the market could go lower early on, then rebound as corporate earnings recover.
