Team,

Each year we invite John Eyerman in to review the performance of our 401(k) plan.  For this year John has prepared some remarks about the market.  Please take a few minutes to read his update and if you have any questions about the update reach out to John.

MARKET UPDATE

Recently, we reviewed the plan’s performance and we find the investment options have been achieving the goals of the plan.

As we have moved in to 2021, we should anticipate some changes.  First, a new Administration in the White House.  Second, is a shift in the political gridlock that has been in place for a number of administrations.  Third, a vaccine for the Corona Virus, and fourth the recovering economy from a sharp, deep recession.  Please see our comments below, including our views on the impacts of these changes.

As we begin a new year, we believe that a look back on some of the policies the Biden administration has campaigned on should be considered.  It should be noted that campaign promises do not always turn in to government policies or changes to law.  As a result, these items should be viewed as possibilities and not guaranteed changes.

• Additional Stimulus and Infrastructure spending by the Federal Government
  • We feel any Fiscal Stimulus spent by the government is likely to help the economy, which in turn can help stock prices. This is expected to serve as a bridge to help with the recession from the Covid-19 pandemic.
• Changes to Personal and Corporate Taxes
  • We believe that we may see increases to taxes, and that the personal side will not have a significant impact on the markets, except for the changes to capital gains taxes. The capital gains tax rates are expected to increase.
  • On the Corporate side, we anticipate higher corporate taxes. As a result, this will impact how much companies can earn on the bottom line.  This may have an impact of future stock prices, but we believe this may be down the road a bit.

With the political scene in Washington, DC changing (namely a more Democratic Party government), some believe that this may have dramatic changes in some of the campaign promises outlined above.  We believe this will need to play out, and although a delicate situation, it may not change as dramatically as anticipated.  After all, the Senate and Congress have elections in 2 years which could again alter the direction in the future.

As we vaccinate the country, we believe that we will see a slowly improving economy.  As we achieve a significant vaccination rate in late spring or early summer, we feel that the economy will show signs of further improvement.  When economic recessions turn in to a growing economy, the markets tend to anticipate this and move higher.

One significant last item to consider for the next year or 2 (and possibly longer) is that the Federal Reserve is taking an aggressive stance on keeping interest rates low.  In fact, the Fed has suggested that rates will be lower for longer and will keep rates low well past the recovery of the economy.  Consider this…the housing market has been the strongest during this pandemic than in recent history.  There are a number of reasons for this, but one of the biggest is that housing is more affordable due to low interest rates on mortgages.  Likewise, stock prices have increased as well, as the cost of borrowing to corporations has been reduced.

After considering these items and many more, we believe that the stock market is poised to continue to grow over the next couple of years.  It’s difficult to look beyond this time frame to say how long, but we believe it’s still a good time to invest in stocks for the long term.

Please note:  Information has been gathered from sources deemed reliable, but cannot be guaranteed.  Past performance is not indicative of future results.

CONTACTING THE EYERMAN GROUP

If you would like someone at The Eyerman Group to evaluate your individual investment strategies and offer some advice.  Please contact Michael Oravetz:

Michael.oravetz@ubs.com, 440.673.1063

John.eyerman@ubs.com, 440.673.1062

 

If you have any other questions about the plan, please reach out to Christine Kloss

klossc@atfco.com      216.688.3171