Here is our take on the articles summarized below: 
While central bank policies and speculation have propelled markets to new highs in 2020, the global economy remains in a deep recession. The markets will not be able to rely on fiscal support forever and rising long-term rates, as well as inflationary and geopolitical risks, threaten to disrupt markets at any moment. As stock prices rise, so does the market’s vulnerability to negative shocks.

Why the Crazy Upward March in Stock Prices Might Just Continue

The Economist
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As positive vaccine news has bolstered hopes of a foreseeable end to the pandemic, investors have expressed cautious optimism for the markets in 2021. In an environment of low interest rates and favorable fiscal policy, bullish sentiment has swept the Street. However, there remain several potential obstacles to a sustained equity run. The primary threat is a battered economy: while markets have moved on from their March crash, the broader economy remains in the valley as sustained lockdowns continue to depress growth. Paradoxically, the bullish sentiment itself may be an anchor on widespread growth as investor expectations may outpace investee recovery. Governments have already played a critical role in keeping the economy afloat, but as time marches on companies will not be able to rely as heavily on fiscal support. Corporate debt has ballooned as access to capital markets has been greatly expanded. Inflation concerns abound as the pandemic has suppressed supply and limited outlets for demand, with the potential to release an inflationary flood of pent-up spending when the economy returns to “normal.” These and other concerns, while material, are not so daunting as they may seem. In the US, the Federal Reserve has indicated its intent to continue its efforts in corporate debt purchasing and inflation control. Abysmal bond yields will keep demand in the equity markets for the foreseeable future, and there is a light at the end of the tunnel for the pandemic. Still, investors must always be cautious when there is widespread consensus.

What We Already Know About Investing in 2021

Jason Zweig, The Wall Street Journal
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“In theory, investing is all about markets; in practice, it’s more about marketing.” Zweig’s observation frames his article about what trends market analysts will likely highlight in the coming weeks. Hot topics like bitcoin, Tesla, and SPAC’s (Special-Purpose Acquisition Companies, which are essentially corporations formed solely to purchase private companies) have dominated the conversation in recent weeks due to their stratospheric runs.  While the yields on these investments are attractive, the market can only support so much speculation; as Buffett put it, “geometric progressions eventually forge their own anchors.” The key to avoiding getting caught up in the euphoria is to put safeguards in place to head off emotional decisions and manage risk effectively. Keeping speculative and investment allocations separate is important, as are tangible limits like investment contracts and portfolio rebalancing. 

The Pandemic and Political Order

Francis Fukuyama, Foreign Affairs 
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“Major crises have major consequences.” Francis Fukuyama believes the world is either headed for a rise in fascism or for a future with more resilient democracy. He warns us that unless current trends change, the outcome could be quite disastrous. The pandemic has accelerated trends of nationalism, isolationism, and xenophobia which increase the possibility of international conflict. Poor countries that don’t have adequate health or public infrastructure are being hit the hardest by the pandemic and, as a result, will have the hardest time bouncing back from the pandemic which will only widen the global development gap. Unfortunately, some governments aren’t making life any easier and are, instead, causing more disruption by inciting tensions, encouraging social division, spreading false information, and by being “simply incompetent.”  

On the other hand, the recovery from the pandemic could reinvigorate liberal democracy. The pandemic will favor expertise and good leadership, rewarding nations that do well and penalizing those who are led by incompetent leaders. It has exposed the inadequacies of institutions everywhere but it has also shown a light, in some cases, on government’s ability to come up with productive solutions and stimulate social solidarity. Furthermore, the crisis could encourage renewed international cooperation. Scientists and public health officials have already begun collaborating and connecting on a global scale, but national leaders will have to jump on board too if there is any hope of a cooperative and sustainable international recovery. Countries with capable and legitimate governments will come out of the pandemic more resilient than before, but those with poor leadership have set themselves up for stagnation and instability. “Democracy, capitalism, and the United States have all proved capable of transformation and adaptation before. But they will need to pull a rabbit out of the hat once again.”

Debt dangers hang over markets

John Plender, Financial Times
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Investors need to be aware of the financial risks facing them as the world navigates through times of great uncertainty. The author, John Plender, argues the markets are currently being driven by central bank policy moves, which means a policy reversal is a grave risk to investors. Investors are also faced with reinvestment risk – “the likelihood that investments providing a good return today cannot be replaced with equally attractive investments tomorrow” – which is currently having a large negative impact on bond markets. This means investors will have to take on more risk to maintain previous rates of return. Furthermore, inflation is a long-term risk that investors need to be aware of especially if labor is “re-empowered” relative to capital and quantitative easing raises general price levels. Adding to inflationary risk is the world’s unsustainable debt level that will probably never be paid off in full, therefore requiring inflation to do much of the debt reduction. It will be up to central banks to raise rates on the debt without causing a devastating shock to the markets. As the author puts it, monetary policy has been asymmetric, “Central banks have put a floor under markets in crises, but failed to put a cap on prices in bubbles.” There is no easy way out of this interest rate trap. Finally, unpredictable political and geopolitical events threaten to disrupt markets. With market valuations so elevated at a time when the world economy is in a steep recession, there is increased vulnerability to negative shocks.