Area experts provide outlook
Area experts provide outlook for 2021 economy
UWCHLAN » The start of a New Year is traditionally a time to reflect back on the past year and to make plans for the new one.
The Chester County Economic Development Council presented is 17th Annual Economic Outlook on Jan. 8, titled “Impacts of COVID-19 on a Post-Election Economy.” More than 200 area business leaders and professionals tuned in for the virtual meeting, which provided a local, national and global view on the economy as 2021 gets underway.
The event featured presentations from returning speakers James Glassman, managing director and head economist for Commercial Banking at JP Morgan Chase, and Patti Brennan, CFP, CFS, president and CEO at Key Financial Inc.
In 2021, the incoming Biden administration and the continued risks of the ongoing coronavirus pandemic will continue to impact the economy.
“For the first time ever, we’re going to be able to say ‘hindsight really is 2020,’” Brennan said as she opened her remarks.
Glassman said most people want to say “good riddance” to 2020.
“For the economy though, 2020 was kind of like a Charles Dickens ‘worst of times best of times year,’” he said. “In my opinion, events like the COVID-19 crisis are like stress tests — they show where systems are inadequate. It’s events like these that make us better. You never get better if you never get challenged.”
Glassman likened 2020’s economic performance to what might happen during a natural disaster, rather than an economic cycle, due to the rapid recovery in some sectors.
Ahead of the pandemic, unemployment was at 50 year lows, and the economy was in the midst of the longest expansion in 245 years.
When the lockdowns began in
March, Glassman said what followed was “traumatic and shocking.” Sixty-five percent of those working in small businesses — 40 million people — had no job to go to. Another 10 million selfemployed people saw demand for their services dry up.
Brennan explained that the stimulus package provided by the Federal government in the spring was “very effective,” but created record deficit, increased the debt and there is still high unemployment and uncertainty going forward.
She said the 2020 recession
was a “doozy.”
“We’re down 10%. We all needed them to provide massive liquidity to help the U.S. psychologically but also to put food on the tables to help families that had lost their jobs. They needed to do something major. It was critical and it was effective,” she said.
Glassman said what happened in the weeks following passage of the first CARES Act was “unprecedented.”
“Indications of financial distress didn’t come close to pessimistic projections,” he said, adding that given the turmoil in the job market, “consumers in May came charging out, real estate soared, manufacturing activity, other than the energy and aircraft sectors, climbed to pre-crisis levels.” Unemployment began to plunge in May, as well.
Because of the stimulus provided, the country is recovering faster than anticipated, according to Brennan. Projections had indicated a 10% unemployment rate into 2021; the current rate stands at 6.7%.
“It is because of the intervention that things are slowly getting back to what we consider a real economy, a U.S. economy, a vibrant, robust, growth oriented environment,” she said.
Chester County’s unemployment rate followed the path of the Pennsylvania and national
unemployment rates, she added, but didn’t go as deep – 4.9% in October compared with Pennsylvania’s 7.3%.
The stock market, Glassman added, was optimistic from the “get go,” ending the year at an all-time high. He added that the market response was not all that surprising.
In looking at the stock market, Brennan said the performance in 2020 was a “tale of two markets.” Initially, she said COVID winners were the big tech companies, while the COVID losers were the banking sectors and the airlines. Performance by the winners initially was down about 8% while the losers were down close to 47%.
According to data shared by Glassman, the economy by the end of 2020 was nearly back to pre-crisis levels — although still down about 1.3%.
“The fiscal response was unprecedented — interesting in a time of political polarization that we’re living with right now,” Glassman said.
Brennan pointed out that she cannot remember an election filled with so much emotion and anxiety. She said that what happened in the market in 2020 was “textbook,” and making decisions on long-term financial assets based on something
that might be happening this year, “is probably not a good idea,” because there isn’t much of a difference in rates of return in election years and other years.
“If we’re talking just about the market — it doesn’t really care if we don’t like who is president. In fact, liking or hating the government is not really going to be a sound investment strategy,” she said.
Brennan said the market recovered quickly because people “held on,” with those that held on earning 16% despite the crash.
“The take away here is — winners rotate. You have to be diversified,” she added.
Glassman said there is reason to think the national economy may grow by about 5% in 2021.
“Keep your fingers crossed, but honestly, I don’t think you need a lot of imagination to believe that this is going to be a decent year for the economy. The markets are telling us this, medical science is telling us this, consumers are telling us this and businesses are acting like this will be so,” he said.
Brennan encouraged the audience to keep an eye on potential tax changes that may be coming out of the Biden administration. She also urged them to keep their financial goals in mind.
“When you’re hearing about all the drama and looking at it all I get its scary to focus on the longer term trajectory. You can’t listen to it. When you hear the hype, that’s the worst time to do anything,” she said.
She added that 2021 is the year to think about getting things in order.
“In doing so you will have a feeling of being organized and in control — leading to peace of mind,” she said.
The presentation can be viewed by visiting https:// ccedcpa.com/news/17thannual-economic-outlook/.