The U.S. economy is expected to start growing robustly thanks to COVID-19 vaccine availability, businesses reopening, and government stimulus initiatives, but some ominous clouds loom on the horizon. However, AMG is optimistic about equities and the economy in 2021. What should you do to take advantage of the economic reopening?

Well, as the saying goes, make hay while the sun shines. However, you should make sure the cupboard is stocked for potential storms ahead. Also, realize that this market may be a little more complicated than buy and hold. Consider these five points:

  1. Take some profits from 2020, if you haven’t already done so. While AMG is optimistic about 2021, there is heightened risk with the recovery. You should not have assets you may need to access in the next several years invested in equities.
  2. Don’t play the momentum game. The stocks that did well in 2020 aren’t necessarily the ones that will do well in 2021. So be prepared to rotate some of your portfolio away from the highfliers of 2020 into more of the cyclical stocks that lagged in 2020. Typically, these cyclical value stocks are the ones that outperform in an economic recovery.
  3. It’s time for another look at foreign equities. The massive amount of debt the U.S. is carrying will likely weaken the dollar, which is good for foreign stocks.
  4. Don’t watch the markets every day, unless you miss that feeling of being a kid on a rollercoaster. Economic change, even when it’s positive, makes markets volatile. The market has to reassess last year’s winners, which also means reassessing last year’s losers. Expect bounces.
  5. Don’t be afraid of capital gains. We all want to minimize our tax exposure, but minimizing taxes is not always the same as maximizing profits, and it usually means increasing risk. While you and your counselor should look for ways to minimize the tax impact, don’t let the taxes keep you from harvesting your hay and storing it in the barn.

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