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We Don't Know What Will Happen with Stocks in 2021

As long-term investors, we should be thinking about where the stock market will be in five to ten years (if not beyond). But human nature inevitably leads us to wonder what the fate of stocks will be in 2021. It's simple -- we don't know.

 At the dawn of 2020, no one anticipated a major pandemic or the whipsaw reaction of the market that ensued. Some experts ended up changing their views during the year as the market turmoil played out.

Let's pick on Goldman Sachs. At the beginning of 2020, the S&P 500 Index stood at 3245. Goldman Sachs saw it rising to 3700 by the end of the year. But after the stock market plummeted in March due to COVID (reaching a low of 2281), Goldman Sachs cut its year-end target to 3000. Then the market came flying back and they bumped their target up to 3600 in August and 3700 in November. These brave decisions were made well after the market was on the road to recovery.

So what are the experts saying now? On the premise that it matters, their picks are all over the place. Barron's polled 10 investment companies, who typically have a positive bias towards stocks. (You rarely, if ever, hear them yelling to sell everything and run for the hills.) With the S&P 500 starting the year at 3756, they offer a wide range of year-end targets:

  • Low: 3800 (Citi and Bank of America), constituting a 1.2% gain
  • High: 4400 (JP Morgan), constituting a 17.1% gain

Quite a disparity. I'm confident that you can find experts that say the market will suffer a loss in 2021 for any variety of reasons.

The results at the end of the year will seem obvious in hindsight as so many scenarios are plausible. If the economy is slow to open up because of an ineffectual dissemination of vaccines, the stock market may decline. An economy that recovers quickly may have a positive impact, unless you believe that the good news has already been priced into stocks.

Feel free to contact me to discuss my thoughts on how to handle such uncertainty. By the way, you may have noticed that if Goldman Sachs had kept its original 2020 prediction, it was pretty close to what occurred.

Words of Wisdom

Someone asked me, "What's your idea of a good time?" I said "6:45." -- Dick Cavett