What We Might See From The Markets In 2021

The end of 2020 has given just about everyone a reason to celebrate. The year that saw so much ugly news and financial turbulence has finally given way to a new year on the calendar, and with it a renewed focus on what matters most. If you’re like many, your financial health is of paramount importance after the ups-and-downs of 2020. That means your financial strategies for 2021 need to be ready for anything.

We celebrated the end of 2020 with more vigor than any other year in recent memory. 2021 may be just as turbulent for investors as 2020 turned out to be, however. The United States still leads the world in COVID-19 cases, herd immunity may take the entirety of this year, and the damage done to the domestic and international economy has yet to be fully reckoned with. Fiscal stimulus efforts are still underway and new rounds may be down the road, which can lead to inflation.

If you’re looking to make the most of your money this year, you may want to prepare for a few potential financial likelihoods for 2021. While we can't definitively say or predict what is going to happen, here’s what we might see from the markets this year, and how you can plan accordingly.

Plan for Volatility

Just because 2020 finally ended doesn’t mean that its major disruptor is behind us, too. COVID-19 is still spreading at a spiraling rate across the country. Vaccination efforts are a grab-bag of state-level efficiencies (and, in most cases, inefficiencies). There’s no reliable target as to when the world can get back to “normal,” which means that markets might be all over the place for the foreseeable future.

Again, while we can't say with certainty that this is what will happen, it's likely that investors will see wild value market fluctuations. This is particularly true for specific sectors such as technology and travel. The video conferencing market was worth $5.32 billion in 2019. By 2027, it's expected to double in value. The travel sector will hinge on whether Americans make summer vacation plans, either due to (or in spite of) public health advisories. 2020 cost the travel industry $1 trillion, and it may not come roaring back in 2021.

In addition, expect markets to jump on headlines rather than stats throughout 2021. You may want to protect your portfolio against volatility by moving more of your assets into different investment types. Pulling back on stocks in favor of funds and alternatives can reduce your exposure to ebbs and flows, and in the case of alternatives, even buck the volatility trend.

Protect Against Inflation

Inflation may also increase in 2021. Initial stimulus efforts pumped cash into the U.S. economy and slashed already meager interest rates. With cheap money flowing through the economy, you can likely expect to see peoples’ purchasing power drop throughout 2021. With inflation comes the risk that global manufacturing demand drops as well as consumer spending. At the same time, the cost of average goods will increase, making kitchen staples like grain and produce gain value.

A good hedge against inflation is one that isn’t pinned to the ups and downs of these and other sectors of the stock market. Bonds were once considered an effective option for safeguarding assets, but near-zero inflation rates mean you’re not likely to earn much on your investment.

Alternatives shine brightly when inflation looms. Some alternative investments, such as those in precious metals, are a go-to for most investors looking to move money out of the market and into a more stable opportunity. Others, such as grain, corn, and livestock all see a rise in value as sale prices increase.

Other alternative investments, such as farmland investing, offer a value proposition that’s even stronger during inflationary periods. By investing in farmland, you’re able to dedicate assets to one of the most stable real estate holdings around. Farmland has enjoyed value appreciation during the past two decades, and increasing crop prices during inflation translates into profits. When you invest in farmland with FarmTogether, you’re able to enjoy greater returns over the similar periods as those of bonds, making them a stronger pick right now.

Diversify and Explore New Asset Classes

Markets may continue to be anxiety-inducing throughout 2021, swinging wildly based on COVID-19 news and sector-based turbulence. Bonds offer unappealing interest rates, making them less of a value pick in your portfolio. Funds help reduce risk in the market, but aren’t necessarily offering outsized returns either. That means diversifying your assets in new ways will be crucial.

This means there may never be a better time to see where other kinds of assets, particularly those in the alternative asset class category, can provide you better potential returns. You may want to go beyond the usual basket of alternatives, however. Expect plenty of company from other investors in precious metals and most commodities. Real estate investment trusts might continue to face an uphill battle as commercial retail demand sputters, and fewer people may be inclined to buy or sell property.

Other alternatives can be your best choice for your 2021 financial strategy. Farmland investing with FarmTogether can take the heavy lifting out of finding the right choices too. Our team of experts assess opportunities and break down choices through our easy-to-use digital platform.

Picking the Best Financial Strategies for 2021

Diversification and hedging against inflation will be critical strategies for the year ahead. With ongoing economic uncertainty, particularly if global supply chain disruptions and other impacts of the COVID-19 pandemic continue, markets may experience increased volatility for the foreseeable future. This means market swings could become the norm rather than the exception.

The good news is that alternative investments can play a more prominent role in your portfolio, especially those that are stable and inflation-resistant. Farmland is one such alternative investment that offers both stability and the potential for growth. By incorporating farmland into your portfolio, you can diversify and hedge against inflation effectively.

Platforms that provide access to farmland investments make the process easier. Investors can explore curated opportunities with clear return expectations and target hold periods, helping take the guesswork out of diversification. With minimum investments starting as low as $15,000, farmland presents an appealing option for those looking to add resilience to their portfolios in an unpredictable market environment.