On the heels of a genuinely unimaginable 2020, we find ourselves at the start of a new year, which we all hope will be better than the one that went before it. In the year just passed, your financial stability was probably affected the most by the pandemic, like many others. How does it look for your future though?
If you want to know how impactful, look at the home page of any newspaper in the world. Those that do not still have an active coronavirus ticker will have – at least – a few stories about how their country, and the world, is being impacted by the virus.
Looking at it as the global story that it is, it can feel a little solipsistic to think about how the virus will affect you going forward, but the truth is that we all have to think about that. Not least because it is going to affect your financial stability as it will affect those of everyone else. This is not going to be a year like 2019; things might never get back to what we considered normal during the “before times”. This will have an impact on the economy; and when you get right down to it, that affects us all.
Financial Stability and Covid: The Effect on Your Future
As we look forward to 2021, then, it is important to consider the effects that are still to come for you and your financial stability. Some of them, inevitably, will be negative, but others may be positive; and being ready for them, good or bad, will help you plan the year out properly.
House prices: Could go up or down, depending on who’s speaking
Throughout 2020, house prices stayed buoyant even against the backdrop of the virus, as realtors used every gimmick they could think of to hold socially-distanced open houses and showings. If you listen to representatives of real estate companies, 2021 will continue this pattern – but there are conflicting viewpoints. Other experts argue that there is likely to be a rise in unemployment until such time as the virus is effectively muted, and as jobless numbers go up, prices will come down. This is one where we have to keep an open mind and focus on your financial stability in the future.
With Congress largely in cold storage until the end of the month, we don’t know precisely what shape any Coronavirus Relief Bill will take. This month may therefore be the best time to refinance home loan packages. If prices were to keep rising, it would be worth holding back, but it’s not something we can be certain of right now.
By making a decision promptly, you can reduce the amount that you have to pay back every month, which is beneficial in a year where we’re all keen to ensure that there’s enough money there to see us through each month which in turn can lead to your financial stability in the long run.
Consumer prices: Set to rise at least initially
Groceries always tend to be the spot that you may try to gain more of your financial stability, as it seems like the easiest place to cut corners or “cut the fat” so to speak. You might need the extra money from renegotiating your mortgage if the received wisdom on consumer prices is to be believed.
Thanks to an uptick in global commodity prices, we’re likely to see “finished goods” – that is, anything that you find in the supermarket in the same form it will go on your table – rise in price for the first six to nine months of the year. As long as the supply holds up, there’s no reason that fresh ingredients should follow the same pattern, and it is hoped that better news on the virus front should see finished goods level off in the final quarter of the year.
How big a deal this depends on your buying habits. In some cases, finished goods are unavoidable, but an emphasis on home cooking and from-scratch recipes will be beneficial for anyone trying to keep a cap on costs. The good news is that most of the dangers to supply chains are known at this moment, and adjustments can and have been made. This far along in the pandemic, there should be few surprises when it comes to fulfillment, and if anything the pressure on supply chains should lift as the year goes on.
Investments: Down to begin with, but overall up in 2021
The value of investments rises and falls with various factors, but one of the most important factors is consumer confidence. It is no surprise, then, that the stock exchanges had a tough year in 2020, but managed to rally well as financial relief made its way to people and stores opened up again. Early 2021 will see a change of administration in Washington DC, and the reaction of the markets will depend somewhat on the smoothness or otherwise of the transition.
The good news for investors is that 2021 will be the year when a widespread vaccine rollout brings a measure of confidence that you can go about your business without fear of infection and infecting others. That’s not going to come immediately, and a lot will depend on the speed of the rollout.
Between 60-80% of the public having been vaccinated, it is expected that herd immunity will have been achieved. This means more workplaces opening up, more people buying more things, and a resultant rise in stock prices. By the end of 2021, the overall trend should be sharply up.
Cryptocurrencies: As ever, buyer beware
If you bought Bitcoin at the start of 2020, and sold it all at the end of the year, your profits would have been somewhere in the order of 160%. That’s an exceptional climb, and as ever with cryptocurrency the question will be how sustainable it is. There are some people who would argue that Bitcoin has matured, but it seems early to make that call, not least as it is still climbing. One would expect a period of relative calm before making the declaration that any currency has matured.
If you have existing Bitcoin holdings, it would not be wise to cash them all out right now, and especially not if you’re cashing them for US dollars. The Federal bank moved to a policy of monetary accommodation in 2020 to keep inflation under control. That policy will stay in place throughout 2021, and that is likely to mean that the dollar remains weak against other currencies.
If you hold on to all or most of your BTC holdings – or if you make your first tentative steps in the crypto market this year – then you should initially see a profit and your financial stability increase throughout the year. Just be aware that Bitcoin’s previous peak was followed by its biggest value loss, so be ready to scoop out at least your initial investment if it starts tumbling again.
Another tip if you’re somewhat crypto-curious is to watch the movements of Bitcoin and then check the signs for Ethereum. The second-most popular crypto coin has tended recently to follow along in the footsteps of Bitcoin when it comes to market behavior, so a sudden uptick in BTC could herald the right time to buy into Ethereum. Cautiously, of course.
Jobs: Already heading back up, expected to speed up in summer
The unemployment numbers naturally ended in 2020 much higher than they began the year, but there were already positive signs by November that the increase was falling off and employment rates starting to pick back up. That’s a pattern we’ll expect to see more of in 2021, although it will be slower than many thought at first. A Forbes study shows that, where 54% of employers in 2020 expected to be hiring at pre-pandemic levels by this July, only 13% are saying the same right now.
So the bad news is that, although employment will climb in the first half of 2021, it won’t be as fast as we hoped nor as fast as it was in 2020’s first quarter. The good news is that it is expected that things will pick up significantly in the second half of the year and that there is likely to be a lot of effort put into making it happen. Much of the current emphasis is on increasing the numbers of green jobs being created and filled, so if you’re looking for a career change to help solidify your financial stability it’s best to focus your attention on that sector or one adjacent to it.
As with so much else, the employment recovery will be dependent on significant uptake of the vaccine, and its proper administration. By midsummer, more people than not should have been vaccinated, including priority groups such as healthcare workers and those who are vulnerable to the virus. Employers will react to changing news, of course, and so should you, so keep an eye on the press and TV news as and when possible.
We can’t say much with absolute certainty at this point, but the above information is as accurate as any we have right now. If you’ve got plans for 2021, or are looking to start making them, then it’s worth checking them against the economic indicators for the year. As we say, they’re not all positive, but they do have the benefit of being realistic, and by the end of this coming year we can hope to have a lot of the recovery behind us, and now is the time to focus on your financial stability.