In just under a month’s time, groundhogs across the United States and Canada will emerge from their burrows and predict whether there will be an early spring.
The custom was, of course, immortalised in the 1993 film Groundhog Day, a term that has since been widely incorporated into English to mean a situation in which a series of unwelcome or tedious events appear to be recurring in the same way.
As we enter 2021 and a third national lockdown, it feels a lot like we’re reliving 2020 all over again. However, even though the government may have restricted our liberties and there may be an unnerving sense of déjà vu, there are many reasons why we can all be more optimistic about 2021.
1. A Covid-19 vaccine signals light at the end of the tunnel
At the time of writing, national regulatory authorities around the world have approved six Covid-19 vaccines for public use. In the UK, the vaccines approved for use have been developed by Pfizer/BioNTech and Oxford/AstraZeneca.
The development of the vaccine has been a huge scientific success story. Developed in record time, millions of us will receive a Covid-19 vaccine in the forthcoming months and the vaccines show a clear pathway to exiting the pandemic.
As well as new vaccines, scientists are developing major advances in the treatment of Covid-19 all the time, and these treatments drastically reduce the mortality of the disease.
With the Chancellor also announcing extended support measures for UK businesses, protecting jobs and supporting enterprise, the economy is well-placed to bounce back quickly – hopefully, in mid to late 2021.
2. We’re living in an incredible period for humanity
Watching the news can sometimes make it feel as if we’re living in a terrible, apocalyptic age. The last decade began with a financial crisis, and in the intervening period the headlines were dominated by terrorism, Syria, populist and divisive leaders, Brexit, Ebola, and environmental disaster.
However, Matt Ridley, author of The Rational Optimist, says that the 2010s were actually ‘the best decade ever for humanity by a mile,’ with collapsing poverty and child mortality and booming growth and lifespan, in Africa especially.
As an example, the Bill and Melinda Gates Foundation reported that, in 1990, 82 children younger than the age of five died for every 1,000 born in the world. By 2019, that number had fallen to a rate of 37. It’s still too many, but it’s a considerable improvement.
Ridley believes that, if we unleash the energy of entrepreneurs, the roaring 2020s will be even better. The development of a vaccine has shown the power of biotechnology, and genomic advances could be set to tackle issues from cancer to the decline of biodiversity – starting in 2021.
3. Climate change is at the top of the agenda
Rewind to the start of 2020 and it wasn’t the coronavirus that was dominating the world’s news headlines. Instead, we watched on in horror at the wildfires that were wiping out huge swathes of Australia’s natural environment.
While there is still substantial work to do to reverse the effects of climate change as we head into 2021, it’s cause for optimism that the issue remains near the top of the political agenda.
More than a quarter (26%) of global energy consumption for heating, power and transportation was from renewable energy sources in 2018, up from 18% in 2017. Experts predict this will rise to 45% by 2040, with most of it coming from solar, wind, and hydropower.
The public are now much more aware of the basic science of climate change and its dangers, even in countries such as the US that were previously resistant. You only have to look at Time naming Greta Thunberg its ‘person of the year’ in 2019 to see how perceptions are shifting.
With the UK set to host COP26 [the UN Climate Change Conference] in 2021 and the US poised to re-enter the Paris climate change agreement, the continued focus on green issues is a good reason to be positive about the future.
4. A sense of community has returned
For weeks in the summer, the nation came together on a Thursday evening to recognise the Herculean efforts of NHS staff and other key workers.
The return of the sense of community has been one of the positives to come from the pandemic. Whether you’ve been shopping on behalf of a vulnerable person, helping your local food bank, or just supporting the fundraising efforts of Joe Wicks and Captain Tom Moore, neighbourhood spirit and selflessness has been a defining characteristic of the last few months.
As lockdowns endure, this community spirit is also set to continue in 2021. From blanket donation points at mosques to Marcus Rashford’s school meals campaign (or just lending your neighbour a loo roll!) this respect for others has brought communities together after years of division.
5. Economies will improve, and this should see markets recover
2020 was a difficult year for investors in UK equities. The FTSE 100 suffered its worst year since the 2008 financial crisis, with the index of top shares falling by 14.3% over the course of the year.
Of course, if you had a well-diversified portfolio then it’s possible you came out of 2020 in profit, as other markets around the world rallied strongly after initial declines.
There are three key reasons to be more optimistic in 2021:
- The vaccines are likely to see a return to normality, so businesses can open and begin to generate profits
- Brexit is finalised. There are likely to be continuing issues along the way, but the uncertainty is gone, and a trade deal should enable businesses to trade with major partners
- A more conventional US presidency points to a period of more stability and certainty.
Going back to point three above, 2021 may also continue the trend for so-called ESG investing. According to The Times, investment management firm, Hargreaves Lansdown, saw flows into ESG funds (those considering environmental, social, and corporate governance factors) double over the year to June 2020.
And, while companies in traditional sectors such as aviation and hospitality continue to struggle, the sectors associated with the digital transformation of our lifestyles could provide great opportunities in 2021.
Robert Alster, Chief Information Officer of Close Brothers Asset Management, told The Times: “Cloud computing, online retail and consumer electronics will continue to generate superior profits growth. Companies developing cyber and artificial intelligence software will also be long-term structural growers.”
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The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.