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An Initial Post-COVID-19 Economic Outlook


December 8, 2020

With several promising COVID-19 vaccines emerging from trials, households and businesses can begin envisioning and planning for a post-COVID-19 economy. There is no guarantee that COVID-19 will be eliminated entirely, of course, but a robust vaccination program should restore some measure of social and economic activity. In addition, the magnitude and timing of existing and proposed fiscal and monetary stimuli should aid the economy in restoring its former momentum. 

The Mather Group is in the midst of post-COVID-19 planning as well, and it believes there are a number of factors which could determine the timing and trajectory of our economy’s 2021 potential recovery. However, rather than constructing a narrow “top down” overview of these numerous macroeconomic factors, we believe a sector-specific analysis is potentially more interesting.

By sector-specific, we focus upon the 11 business sectors which comprise the overall Standard & Poor's 500 Index. In doing so, we have an opportunity to analyze the potential response within discrete segments of our economy. Each sector, as identified by Standard & Poor’s, has been known to respond differently to the economic, financial, regulatory, and business cycle factors which may emerge in a post-COVID-19 environment.

As displayed in the table below identifying these sectors, their response in times of historic and current financial stress may differ greatly when optimism returns to the economy. More specifically, during the beginning of the 2008 Great Recession, the four worst-performing sectors were Financials (-55.3%), Materials (-45.7%), Real Estate (-42.3%) and Technology (-43.1%). Those outcomes were well below that of the overall S&P 500 Index, which fell 37.0%.

However, after the market turned in March 2009, Materials and Technology greatly outperformed the S&P Index’s 2009 return of 26.5%. Real Estate performed well in 2009 as well, with only Financials failing to exceed the Index. This latter sector, linked to the mortgage debacle, was hobbled by repeated bailouts and bankruptcies.



S&P 500 Sector 2008 Total
Return %
2009 Total
Return %
2019 Total
Return %
2020 Y-T-D Total
Return %**
Communications Services -30.5 8.9 32.7 19.1
Consumer Discretionary -33.5 41.3 27.9 22.5
Consumer Staples -15.4 14.9 27.6 5.59
Energy -34.9 13.8 11.8 -40.4
Financials -55.3 17.2 32.1 -11.7
Healthcare -22.8 19.7 20.8 6.8
Industrials -39.9 20.9 29.4 6.4
Materials -45.7 48.6 24.6 13.6
Real Estate -42.3 27.1 29 -4.5
Technology -43.1 61.7 50.3 31
Utilities -29 11.9 26.4 -1.7
S&P 500 Index -37 26.5 31.5 10.1

**Through 11/20/2020
Sources: Standard Poor's; State Street Global Advisors
For illustrative purpose only


Turning instead to the 2019-2020 period, we again find that 2019 pre-COVID-19 sector performance does not always portend 2020 year-to-date results. The total return for Financials (32.1%), for example, slightly exceeded that of the S&P 500 Index in 2019 (31.5%) but has woefully underperformed in 2020. Obviously, credit, liquidity and solvency issues have driven this sector’s poor returns, just as that which occurred in the Great Recession. In contrast, Technology’s significant 2019 returns (50.3%) have continued well into 2020 (31.0%), due in part to such seismic shifts as working at home, video conferencing, cloud computing and digital streaming.

Our initial sector outlook for 2021 is driven by at least four primary factors. These include a slowly recovering global economy, which may begin to approach prior international trade levels; falling but somewhat higher unemployment levels in service industries such as restaurants and hotels; relatively stagnant disposable income and savings levels in some lower income households; and limited credit availability in sectors such as energy and real estate.

We would like to suggest that each of these 11 sectors could be labeled with one of three outlooks for its potential 2021 financial performance: Positive; Neutral; or Cautious. A Positive outlook would suggest relatively stable revenue growth and profitability levels overall. A Neutral outlook would be attributable to a more variable revenue and profitability profile, while a Cautious outlook suggests higher levels of variability due to potential exogenous shocks.

A column displayed in the table below identifies several company examples within each sector, but the listing of these companies is for illustrative purposes only. More specifically, these analyses do not constitute a recommendation by The Mather Group to either purchase or sell any of these securities. It also does not imply that we are looking to take action as we have an indexed-based philosophy. A final column provides just a limited sample of some of the potential rationales underlying each of these sector outlooks.


S&P 500 Sector Sector Examples Outlook Rationale
Communication Services AT&T; Disney; Facebook Positive 5G Wireless rollout continues; streaming demand increases; media production restarts
Consumer Discretionary Amazon; Ford; Home Depot Positive Continuing shift to online shopping; falling unemployment levels; luxury product demand returns
Consumer staples Coca-Cola; Costco; Procter & Gamble Neutral Household stocking abates; private label products impact brands; weak hospitality industry growth
Energy Chevron; Exxon; Kinder Morgan Cautious Modest increase in fossil fuel demand, increased focus on renewables; limited credit availability
Financials Charles Schwab; Goldman Sachs; JP Morgan Positive Lending margins improve; heightened M&A activity; loan losses decline
Healthcare Johnson & Johnson; Medtronic; United Healthcare Positive ACA continues; increased vaccine focus; genomic healthcare solutions emerge
Industrials 3M; Boeing; Caterpillar Neutral Reduced aircraft demand; slowly recovering business and vacation travel demand; farm economy strengthens
Materials Dow Dupont; International Paper; Newmont Mining Neutral Slowing housing lumber demand; recycling requirements increase; heightened environmental oversight
Real Estate Boston Properties; Public Storage; Simon Property Group Cautious Slowly recovering business and vacation travel demand; continuing shift to online shopping; limited credit availability
Technology Accenture; Intel; Microsoft Positive Business Automation accelerates; hardware strategy shifts to services; continued growth of cloud computing
Utilities Duke Energy; Exelon; Southern Company Neutral Increased focus on renewables; higher infrastructure spending; commercial real estate energy demand weakens
TMG For Illustrative Purposes only.


Overall, as shown by these sector profiles, The Mather Group is forming a cautiously optimistic outlook for the overall US economy in 2021, even if some sectors may be somewhat weaker contributors than others. However, we suspect that the underlying momentum of the economy may only emerge later in 2021. Turnover in key policy positions in a new administration, for example, may be one factor determining the economy’s trajectory, as will be the pace and timing of a successful vaccine rollout. As always, the future is impossible to predict, but there do seem to be some reoccurring themes around this thought exercise. Thus, The Mather Group may update this initial outlook as events and circumstances require.

In parallel, we hope that you will maintain focus on your long-term financial plan, developed to help you and your family achieve your retirement goals. If the close of 2020 suggests a need for any changes or refinements to your financial plan, then The Mather Group stands ready to support you in effecting these changes. If you have further questions or ideas, please do not hesitate to reach out to a member of The Mather Group’s professional team.

Important Disclosure Information

The Mather Group (TMG) is registered under the Investment Advisers Act of 1940 as a Registered Investment Adviser with the Securities and Exchange Commission (SEC). Registration as an investment adviser does not imply a certain level of skill or training. The opinions expressed, and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The opinions and advice expressed in this communication are based on TMG’s research and professional experience and are expressed as of the publishing date of this communication. TMG makes no warranty or representation, express or implied, nor does TMG accept any liability, with respect to the information and data set forth herein. TMG specifically disclaims any duty to update any of the information and data contained in this communication. The information and data in this communication does not constitute legal, tax, accounting, investment, or other professional advice nor is it intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation. Past performance does not guarantee future results.

The mention of specific securities and sectors illustrates the application of our investment approach only and is not to be considered a recommendation by TMG. The specific securities described do not necessarily represent securities purchased or sold for a TMG portfolio and it should not be assumed that an investment in these securities were or will be profitable.

An index is a portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.

The Mather Group



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