2020 Fourth Quarter Commentary

Unprecedented fiscal support and adaptive business operations helped push the economy towards a faster than expected recovery during second half of 2020. Unfortunately, economic output measures coming into 2021 will reflect some version of a holiday hangover given the re-introduction of quarantine measures following the increasing Covid-19 caseloads during the winter season. With that said, the 4th quarter of 2020 laid to rest many of the market’s greatest uncertainties- namely the conclusion of the US presidential elections, and of course, a potential end to the pandemic with several effective vaccine releases. So, while 2020 has concluded, the story is not yet over. The economic response to the virus will remain the biggest threat to risk assets. Depending on the outcomes of the Georgia Senate race, a Democratic sweep and control of the Senate could potentially lead to more fiscal push over the next few years to further boost economic growth. This in turn could lead to a larger than expected steepening of the yield curve-a significant risk for fixed income investors. In the near term, the economy faces the potential of another short-term contraction while Covid-19 caseloads remain elevated and march higher as we aim for herd immunity.