In last year’s version of this article, we predicted 2020 would be the calendar equivalent of Mr. Toad’s Wild Ride. The year did not disappoint. In fact, it took that moniker and ran with it. Someone once asked Tom Clancy, “what’s the difference between writing non-fiction and fiction?” Clancy answered, “fiction has to make sense.” To paraphrase, fiction needs to be believable. How many things did we encounter in 2020 that were plain old unbelievable? And not just the garden-variety unbelievable (Fenn’s treasure found) but the really, truly, totally unbelievable (Zoom’s market value worth more than the top six leading U.S. airlines combined). Yes, that kind of unbelievable.
As we dive into the year-in-review part of this article, I’ll keep it short. I think most people, myself included, are ready to wave goodbye to a long year that sometimes felt more like the plot from one of Clancy’s thriller novels. But before I start, I want to take a moment to acknowledge the profound social, political and human turmoil that have been our constant, unwanted companions on the long journey through the last calendar year. The loss of life is the most tragic aspect of 2020. Our hearts go out to all who have experienced the loss of a loved one, a job, or a home.
The biggest story of 2020 was, of course, the global pandemic that continues to extract a heavy toll over 12 months since COVID-19 was first identified. Last March (which feels like a lifetime ago), we saw the first shutdowns and stay-at-home orders. Kids no longer went to school on-campus and virtually everyone lucky enough to still have a job got very familiar with the acronym WFH. Some hailed working from home as the answer to their prayers, others were dragged into it by necessity. Many now had to juggle work and family 24/7. These two factors alone – going to school and working from home – profoundly changed the lives of nearly every American. And the echo of 2020 will radically change the nature of how we will work and live in the coming years.
For many industries, 2020 was the business equivalent of an extinction event. The retail, food service, fitness, travel and entertainment industries were perhaps the hardest hit. In the final days of 2020, many of those businesses remain closed or if lucky, open at a reduced operating level. Out-dated business models continue to fall on the heels of the pandemic. The latest example came from Warner Brothers who recently announced that all 2021 movie releases will bypass theaters and move to a streaming delivery model. Other sectors have been forced to get creative with the use of technology. Education, in particular the K-12 demographic, is now entirely online in many places. The SAT and other college entrance exams that were traditionally conducted in-person are now scrambling to maintain validity in a digital, no-contact world. In the same vein, the healthcare industry has accelerated its digitization efforts by aggressively looking for more effective and efficient ways to deliver basic services over the phone or online.
As we move into the year-ahead part of the article, the thing that stands out the most to me is a growing sense of cautious optimism for our collective prospects in 2021. Yes, we know that infection rates are still very high. In places like California, they are at some of the highest levels yet. And we know that will likely continue into the first part of 2021. But the rollout of the coronavirus vaccines, and the recent election results have created, if not a sense of optimism, then at least a perception that things in 2021 will be “less bad” than the year we are about to leave behind.
Pandemic aside, the next big thing in 2021 is the changing of the guard at the White House. The incoming administration will have its hands full grappling with a host of pressing political, social, economic, and diplomatic issues. Let’s run down the list of hot topics and see what the BlueSky crystal ball has to say.
Tax policy will be in play during 2021. Trump’s tax cuts for corporations and high net worth individuals, along with his policies supporting tax havens, will likely be in the sights of the new administration who will seek to reverse, restrain, or replace them. We see the new administration focusing on tax cuts that help rebuild the supply chain, and bring jobs back to the U.S. We are likely to see a tax increase across the board, however, because one unfortunate reality of the various stimulus packages is that taxpayers will be footing the bill. No surprise there.
The Trump administration talked about building roads, bridges, walls and a host of other infrastructure but those plans never really panned out. We see Biden’s administration using incentives to drive emerging, forward-thinking green energy (solar, wind, EV, etc.) with a focus on creating a sustainable infrastructure plan that will support it.
On the issue of healthcare, Trump sought steep cuts to Medicare/Medicaid and to overturn what he saw as “Obamacare.” While Biden tends to favor private insurance, we do see Biden’s administration expanding the Affordable Care Act to promote healthcare for all and focusing on a comprehensive healthcare quilt that blends private insurance, Obamacare, Medicare and Medicaid to give consumers more choices.
On the international front, we see the Biden administration looking to strengthen the U.S. dollar as much of our nation’s economic power comes from our role as the world’s reserve currency. The stock market’s performance over the last year was largely driven by circumstance and the need for tech and innovation to address the global pandemic, economic shutdown and necessity of living, schooling and working from home for the foreseeable future. We see those trends continuing well into 2021 and beyond.
Trump’s approach to trade was largely based on using provocation, in the form of trade threats and tariffs, to create a better climate for U.S. goods in China and Europe. It was largely reactionary in its execution. We see Biden focusing more on proactively protecting U.S. intellectual property rather than physical products or commodity goods. With the SolarWinds hack still fresh in everyone’s minds and the deeply sensitive nature of some of the organizations that were compromised, it’s clear that we need to do a better job of protecting our intellectual property and intellectual capital from bad actors, both foreign and domestic.
While it’s true that the Trump administration was able to create jobs, those gains were largely lost during the shutdowns and ensuing layoffs. Adding to the hiring market mix was the out-going administration’s decision to put a limit on visas for foreign workers. We see the Biden administration taking a two-pronged approach to getting people back to work. First, it’s obvious that the Biden administration will be working to create new jobs and get shuttered industries back in play. This plan likely includes some form of support for renewable energy and technology initiatives that require a large labor pool. Next, we see the in-coming administration increasing the minimum wage. The general consensus seems to be that this is a good thing given that the retail, hospitality and food service industries represent some of the hardest hit, in terms of jobs lost, and employ a high percentage of minimum wage workers. And on the foreign visa front, we see the new administration working on an updated visa system that helps to keep top talent here, rather than overseas.
The renewable energy and technology initiatives mentioned above represent the first move in a major pivot on the climate front. Trump’s administration supported fossil fuel and removed the US from the Paris Climate Accord. We see the Biden administration rejoining the Paris agreement and providing more government backing and funding for things like a comprehensive EV infrastructure that includes charging stations, battery disposal, etc. Private companies, like Tesla, are driving real change in the areas of EV and renewable energy. We see the Biden administration taking a positive stance in terms of supporting and encouraging those private industry efforts.
We also see a related area taking off in 2021 and that’s Environmental, Social & Governance (ESG) ratings and evaluations for companies. The departing administration was against such ratings; however, the Biden administration is likely to be far more favorable to the concept. ESG is already embraced in Europe and it would not surprise us if the new administration not only encouraged it, but provided motivation for the U.S. to become a leader in the space. Some of this is being driven by a new breed of investors who are only interested in backing companies that have a positive ESG rating. As ESG investing gains momentum, we see shareholders demanding more investment towards companies with positive ESG ratings because it’s simply the right thing to do.
Last but not least, student debt is another hot topic. On that issue, we see the Biden administration exploring opportunities to deliver partial debt forgiveness, perhaps with a higher emphasis on those with medical and healthcare-related degrees. And potentially offering new ways to repay student debt.
Whatever your political leanings are, it’s clear that the out-going administration’s tenure was accompanied by a high degree of volatility, on both the domestic and international fronts. We see the incoming administration making great efforts to create stability, predictability and foster a return to a “normal” way of life. Although, ultimately, it’s anyone’s guess what that next version of normal will look like as we pass through 2021 and beyond.
No matter what happens in the coming year, two things remain certain. One, we have each other, and together, we will get through this and be better and stronger because of it. Two, where there is uncertainty there exists opportunity. Given the seismic shift in our personal and professional lives, I might argue that 2021 represents a vast, uncharted sea of opportunity for those who have the initiative and imagination to help create a version of normal we can all live with.
Stay safe. Stay healthy. And best of luck to you and your team in 2021 from all of us at BlueSky!