It’s time to go on the record and make some predictions about the future of 2021. You may not like some of these predictions, and as a matter of full disclosure, this is not investment advice.
It’s merely my experience and knowledge with financial and real estate markets and also my visceral subconscious feeling about the way the year will unfold. Here we go!
The US Dollar will weaken significantly over the course of 2021.
Currently, the Dollar Index which is a measure of the US dollar compared to six other foreign currencies is at 89.73, according to the DXY index. To give you some perspective, the dollar hit an all-time low back in July 2008 at 72.64. The headwinds are growing for the US dollar in the form of a looser monetary policy by the Federal Reserve, a growing US trade deficit which essentially exports our weakened US dollar for imported goods, and an out of control fiscally irresponsible Federal Government. Recently, the US dollar was down 1% against the Chinese yuan. This is the biggest drop on the first trading day of the year in over 30 years, according to Peter Schiff.
The Stock Market will make a major correction.
By keeping interest rates low for years to come, the Federal Reserve has pushed investors who require yield on their investments into the stock market. This is the problem with fiat currencies, as they encourage wild swings in the markets. This is evidenced by the recent IPO of Door Dash, which went public on 12/9/2020 and valued the company at $72 billion which is more than the value of Chipotle Mexican Grill and Domino’s Pizza combined!
Commercial Real Estate as an asset class will be negatively impacted.by the weakness in retail and office as a result of the government shutdowns on businesses.
According to Yelp, from March 1st to August 31st, nearly 100,000 business listed on Yelp closed permanently, which is an average of 500 per day. Additionally, according to PERE, a private equity real estate publication, there are major signs of foreclosure requests from special servicers for CMBS debt in hospitality and retail which is forecast to spread over to office and multi-family. “We’ve seen an explosion in the percentage of loans going into special servicing over the last six to seven months.” concurs Manus Clancy, senior managing director at Trepp.
There are signs of stormy economic weather ahead. So, consult with your financial adviser and educate yourself on what steps to take now, in the event 2021 ends up becoming an uncertain year.
We know 2020 was a really tough year for a lot of people, but only time will tell if 2021 will be any better.