By Vared Shmuler
COVID-19 has had a two-faced effect on the American economy. On one hand, many small businesses and franchises have had to temporarily or permanently close their doors to their clientele; on the other, the pandemic has acted as a catalyst for an array of investment opportunities, particularly in securities and real estate. The U.S. stock market ended 2020 at an all-time high. Even the S&P 500 stock index, one of the most widely-watched gauges for the market, finished the year up more than 16 percent. Investors in the stock market have benefited significantly from the sudden surge, but homeowners and real estate investors have also benefited from the continuous low interest rates implemented by the Federal Reserve.
With the stock market enduring initial volatility during the beginning of the pandemic and finishing up 2020 as a clear bull market, we are left to consider: What about 2021? Will the economy flourish and continue on this unforeseen path, or will a bubble burst, leading the U.S. to reach negative growth and further continue the state of uncertainty?
Anticipating the future requires a deep understanding of the present state of our nation. The United States is still very much plagued by COVID-19. Even after undergoing ten months of a global crisis, we are still at a great risk of a prolonged second wave which will cause the economy to suffer. This could mean a first quarter with negative output growth, which signifies a recession on the horizon. However, due to the recent development and distribution of COVID-19 vaccines, the course of 2021 will likely look more positive. Most states will soon be able to provide the vaccine to the general public, following the decisions made by the governments of Florida, Louisiana, and Texas. Only after these events will the economy begin to recover.
Here’s my prediction: With the rising number of cases and the vaccine only open to a select few, the GDP, which measures the total value of economic output in the country, will decrease. However, after more vaccines are distributed and more people are able to receive treatment, the economy will stabilize, but not completely revert to its pre-pandemic state. Even as regulations are relaxed, industries such as hospitality, dining, and cinema have potentially been changed forever. The redistribution of economic power towards other industries, like technology and automobiles, will lead to a “new normal” for the foreseeable future. In summary, due to the recent spike in coronavirus cases counterbalanced by the distribution of vaccines, we should expect an economic dip followed by a recovery.