But a few more sleeps ‘til this miserable year expires. I hear there are calendar-bonfire parties planned. No wonder. A pox on it.
In many ways 2020 has defied logic. We’re ending the year with three-quarters of the Canadian population in a gritty, frozen lockdown. Millions have lost their jobs. Small businesses are collapsing. Governments are broke. Fifteen thousand dead from something we never heard of eleven months ago.
And yet the financial markers are historic. House prices hit a record high this year. The personal savings rate soared as never before. The cost of a mortgage sits at the lowest point ever. The federal deficit is the fattest in history. And stock markets have leapt to a new plateau – in the same year they fell into bear territory at the fastest pace in memory.
Wow. Look at the S&P 500 so far this year.
So here we are in the final days. Your balanced portfolio made good money. Your real estate is (probably) worth more. If you WFH your costs are way down and personal finances better. The virus is worse, not better, and nobody in July expected Christmas would be cancelled. Now we’re into the teeth of winter and you can’t even go sit in a Timmies.
Anyone who tried to make good predictions a year ago was daft. In fact, attemptong to foretell the future is moronic, foolhardy, arrogant and brazen. So, here we go…
Equity markets.
Hard to imagine a new string of record highs will not occur. The biggest inoculation in global history is being rolled out and the slimy little pathogen will ultimately retreat. The world’s economy will sputter to life again, led by the USA. More demand means higher commodity prices which is good for Canada. Pent-up demand after months of lockdowns and quarantines will combine with high savings to fuel consumer spending. Corporate profits will reflect this and meanwhile the virus poured gas on a whole new tranche of online businesses. 2021 will not be a year to sit in cash.
The cost of money.
What you see is what you’ll get. Central banks are too freaked out to move their benchmarks for at least a full year, maybe two. They’ll also keep buying up government bonds to suppress yields, flood the world with liquidity and keep the lights on. Mortgages in the 1.5% range are here for most of 2021. But not forever. As inflation becomes a thing again bond market investors will be demanding protection, goosing yields no matter what the CBs want. So, yes, lock in.
WFH
It’s been one of the most defining features of the year of the virus. Four in ten Canadians ended up beavering from home. Offices closed. Downtowns emptied. Commuting, dogwalking, dry cleaning and child care costs sunk. Millennials suffering from recency bias moved away to the burbs. The work-life balance debate tipped dramatically towards sweatpants. Animal shelters emptied with a run on pets. Careers turned into jobs. But soon the scales will tip again. By this time in 2021 most people will be back in the workplace, at least on a sked. So, you’ll need a new car.
Real estate.
The spring market will be nuts, and start soon after the virus numbers crest and the lockdowns end. Mortgages are dirt cheap. Cash savings abound. House horniness is elevated because of the bug and its nesting impact. No matter how much risk is involved, people will continue to throw the bulk of their net worth into a single asset. The trends: more suburban price/sales gains in the first few months with further declines in deals/rents for urban condos. Then, mid-year, a sea change. Should be dramatic.
Meanwhile in 2021 there’s Trump to finally bury – that will be messy – and it’s a certainty Canadians will suffer a federal election. Then a budget you won’t like much (so crystallize some capital gains before March), and the Covid emergency will kind of slide into a climate emergency because politicians feed off chaos.
But compared to this year, pffft, piece of cake. Get the matches ready.