Sunnier Days Ahead: Q1 2021 Market Commentary

By: Mark Paccione, CFA, CFP®, BFA™
3 Minute Read

As we leave behind an unforgettable year and the shocking events on January 6, 2021, it’s time to look ahead at the promise of the new year and what we can glean from it.

The pandemic should end. Despite the bleak, daily COVID-19 statistics, experts believe the surge of new cases will peak this month. Most importantly, we have two vaccines that are now being distributed. It’s no longer a question of if we’ll ever return to some sense of normalcy but when.

While making predictions is inherently a tricky business, we see a number of reasons to be optimistic about the global economy in 2021.

Fiscal and Monetary Policy

First, fiscal and monetary policy remain supportive worldwide. In September, the Fed indicated they would keep rates low until 2023. With interest rates expected to be at historically low levels for the foreseeable future, we believe conditions remain favorable—especially for residential real estate, which should see continued strength this year.

The U.S. Congress recently passed another round of stimulus that should boost economic growth in 2021, with the possibility of additional stimulus given the Democrats’ surprise win in the Georgia run-offs.

Finally, we expect governments and central banks around the world to remain accommodative given the ongoing pandemic.

Some investors are nervous about one-sided government as Democrats control the White House, House of Representatives, and Senate. We believe there is a higher probability of increased taxes and heightened regulations, which many consider market-unfriendly – however, the risk to markets should not be overstated. We believe the narrow margins in the House and Senate and the specter of a mid-term election should prevent a dramatic leftward swing in government policy.

In addition, it’s worth reminding investors that Democrats, higher taxes, and regulation do not equal negative market returns, if history is any guide. Please see our last commentary, Love Your Enemies, for more on market returns under different political parties.


Second, economic growth, as measured by GDP, could be well above trend this year as pent-up demand becomes a reality. Cornerstone Macro recently forecasted real GDP growth (GDP ex-inflation) in excess of 6%.[1] If that occurs, it will be the strongest economic growth in more than three decades.[2]

Low interest rates, a new round of stimulus, and pent-up demand for products and services that suffered during the pandemic, are three major economic tailwinds that should not be underestimated. We are very optimistic about the economy in 2021.


While we are taking a positive outlook on the economy, we have a more balanced view on markets. We believe stocks in general are richly priced compared to historical averages based on fundamental metrics like Price/Earnings Ratios.

We do not believe bonds are cheap either. The U.S. Treasury 10-year bond yield remains at historically low levels at 1.14% as of January 12, 2021,[3] despite the recent rise in interest rates.

In our view, both stocks and bonds remain expensive compared to historical averages. While stocks and bonds can always get more expensive, we believe investors should set expectations for more muted investment returns.

In Summary

Given the low-return environment expected, there are several courses of action that investors can consider. Investors who have upcoming cash needs can raise some of the funds now.

This is also a great time to review your financial plan and ensure your investment portfolio is appropriate for your risk tolerance and aligned with your financial objectives.

Finally, we recommend that investors consider a globally diversified investment portfolio with more than U.S. stocks and corporate bonds. We believe our globally diversified portfolios are extremely well-suited for today’s market environment, as other asset classes are currently more attractive.

If you are interested in reviewing your portfolio, discussing potential actions, or exploring what Curi Capital can do for you, please reach out to a member of the Curi Capital team at 984-202-2800.

 Please note: This material should not be considered a recommendation to buy or sell securities or a guarantee of future results. Curi Capital is a registered investment advisor. Registration does not imply a certain level of skill or training. More information about Curi Capital can be found in its Form ADV Part 2, which is available upon request.

 Past performance is not a guarantee of future results. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions, or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.


[1] Lazar, Nancy. Cornerstone Macro. 3 January 21. “Consensus For GDP And Earnings Are Probably Too Low.”

[2] U.S. Bureau of Labor Statistics

[3] Bloomberg

Mark Paccione, CFA, CFP®, BFA™
Mark Paccione is Curi Wealth Management, LLC’s, Chief Investment Officer, based in Raleigh, NC.
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