Remember that stocks aren’t pricing in the current earning potential, but the future earning potential. While 2020 was a difficult time for the world due to covid-19, we believe stocks are measuring beyond this and pricing in a recovery of earnings growth. Analysts expect S&P 500 earnings to resume growing in Q1 2021 at 16.5% y/y. If we look further out, we believe the backdrop should look better still. If the US meets the CDC’s vaccine distribution plan, we should see a recovery in travel and tourism. By this time, we should also see the Biden administration’s plan for governing.

The median US GDP forecast calls for 4.1% growth, with the lowest analyst reporting 1.8% and the highest 7.1%. Remember that forecasts are rarely accurate and headlines and developments likely will develop causing the occasional volatility and correction. Optimism regarding 2021 looks justified at this time.

Nothing herein is intended to be investment advice. Investment in the stock market involves risk of loss, including the loss of principal. Past performance is no guarantee of future returns. The content contained in this article represents only the opinions and viewpoints of the Interlaken Advisors editorial staff.