As vulnerability and transparency became a theme and “casual” became the new corporate, the historic implications of 2020 and COVID-19 will resound for generations. In a socially distanced year, we grew closer to our computers, and social media expanded engagement with our now distant communities. Greater screen time increased the desire to explore new economic realms and had an unprecedented effect on trading and markets, with many Main Street investors waging their bets on Wall Street trades. A rise in day trading and calls for transparency and accountability have resonated across markets. As we cross the one-year anniversary of the COVID-19 shutdown, we expect many key stories from 2020 to continue playing out this year. Here’s what has been on our radar and what we are monitoring.
New expectations for corporate accountability and transparency
Heavily influenced by public calls for transparency, organizations of all sizes experienced a watershed moment in 2020 as they were forced to scrutinize their reputations and values. We expect this trend to continue in 2021. In the past, most businesses based their reputation on quality and service. While those requirements still hold today, public expectation has shifted towards a human approach focused on genuine care for the health of employees, as well as compassion and empathy. A primary contributing factor in this shift was the widespread uncertainty permeating the events of 2020. Social and political unrest, a worldwide lockdown in a global health pandemic, and economic volatility marked by a record unemployment rate that reached 14.7%.
Undoubtedly, people desired integrity, assuredness, and transparency of corporate actions, and companies sought to meet those demands through communications reflecting their prioritization of emerging crises and an awareness of social struggles. Many sought to bring issues like racial justice and climate change to the forefront. Social media spearheaded a backlash against companies who failed to divulge their efforts to become more equitable and climate-impact-focused. Among this shift in perception was a rise in environmental, social, and governance (ESG) investing, marked by the 42 percent increase in total US-domiciled assets under management using sustainable investing strategies, according to the US SIF Foundation’s biannual Report on US Sustainable and Impact Investing Trends. We expect this growth to continue in 2021.
Stories to watch from the new administration
The beginning of 2021 has been filled with news of confirmations and appointments from the Biden administration. Janet Yellen, confirmed as the first female Treasury Secretary on January 25, holds a crucial role in spearheading the Biden administration’s response to the coronavirus recession. This New York Times article highlights key issues concerning Yellen’s role including jobs, debt, cryptocurrency, and the climate. Marty Walsh, Presidential nominee to head the Department of Labor, has signaled the agency will prioritize a review of Trump administration regulations that he says could crimp the use of ESG factors in retirement investing.
In fact, climate has been a key theme in 2021. One of President Biden’s first acts as president was issuing an executive order to rejoin the Paris Climate Agreement. Many of the U.S.’s largest businesses and trade groups have indicated they will pledge trillions of dollars to fight climate change, in anticipation of Democrats’ increased scrutiny of the private sector’s role in climate change.
Focus on the U.S.’s transition to a more sustainable economy is not limited to climate change. Groups such as US SIF: The Forum for Sustainable and Responsible Investment have encouraged the new administration to address the multiple crises created by the coronavirus pandemic, racial injustice, economic inequality, and climate change. A key recommendation, outlined here in GreenBiz, is to create a White House Office of Sustainable Finance and Business to accelerate the growth of a sustainable private sector.
Fate of stimulus payments remains to be seen
When we entered 2020, the Treasury Department and IRS continued to distribute up to $600 in the latest round of direct economic stimulus payments. A new coronavirus wave slammed the U.S. economy and pressure mounted for the not-yet-confirmed President Biden and a narrowly Democratic Congress to push for even more stimulus spending.
Fast forward to the beginning of March and the debate still rages. While the Biden administration fears failure to approve larger stimulus spending could push the economy into a double-dip recession or a slow, painful recovery like that of 2008, others cite concerns about adding to the national debt.
GameStop short sellers open pandora’s box of market speculation
The markets have responded to the rebound from job losses, stimulus payments, and corporate bailouts that marked 2020. Conversation over how to capitalize on stimulus checks brought more people into investing through financial technology, including apps like Robinhood. In what is sure to be one of the most headline-catching financial events of 2021, Reddit users orchestrated a short squeeze on hedge funds holding GameStop and other stocks, targeting unexpecting hedge fund managers and putting them on the hook for billions of dollars. As the platform which mobilized an army of day traders, Robinhood found itself at the center of controversy after selectively barring GameStop stockholders from further trading-–a choice that could prove damning to its reputation and further, small investors’ confidence in a free and fair market. We shared our thoughts on the reputation winners and losers in a recent blog post: GameStop, Short Sellers, Hedge Funds, Robinhood, and Main Street Investors.
Conclusion: Opportunities to be determined as we round out Q1
Although the streak of controversies that permeated 2020 did not end as we crossed a full year into the pandemic, we can look forward optimistically to the opportunities that may influence groundbreaking change in 2021. While some quarantine adversity lingers, our increasing reliance on accessible technology, our “new normal,” has coincided with a push for long desired shifts in markets and politics towards a more impact-centered approach. Through the growth of ESG investing trends, potential changes in climate and social-centered policies, and budding avenues for main street investors, 2021 is ripe with opportunity for groundbreaking headlines and advancement. We will continue to monitor the headlines and look forward to helping our clients navigate the ups and downs of 2021.