Looking ahead to 2021, the outlook seems somewhat brighter for investors. One of the major factors that will play a role in the economic recovery is expected to be the release of the COVID-19 vaccine and its ability to protect workers from the effects of this serious disease. Overall, the global and U.S. economies are expected to improve over the next year, with emerging markets enjoying an especially strong showing as 2021 progresses. Here are some of the most important areas to watch as the Federal Reserve sets the pace for the economy in 2021.

Four Factors to Watch

According to the Financial Times, the Federal Reserve is expected to focus on four key areas in its December 2020 meeting:

  • Buying more bonds: Throughout 2020, the Federal Reserve has been purchasing approximately $120 billion in government debt every month. This has helped the U.S. economy to stay strong throughout the pandemic and has offered a floor of support for investors. This trend is expected to continue at least until the early part of 2021 and may include expanded purchases of bonds of longer maturities.
Buying more bonds

Maintaining crisis credit facilities: Emergency lending facilities have been established to help state and local governments and businesses cope with the stress and financial drain created by the COVID-19 virus. While Treasury Secretary Steven Mnuchin has expressed his desire to reclaim unused funds from these programs, the Fed is hoping to keep these facilities open and operating throughout the duration of the coronavirus pandemic. Jay Powell, the chairman of the Federal Reserve, is expected to push for the reinstatement of these lending programs when the Biden administration takes office next year.

Maintaining crisis credit facilities
  • Pushing for fiscal stimulus: Powell is also expected to continue pressuring Congress for a comprehensive stimulus plan that will provide added support for struggling businesses and investors. This could include direct payments to individuals, more forgivable loans for small businesses and added assistance for those who are unemployed in connection with the COVID-19 outbreak. An effective package would likely range between $748 billion and $908 billion in aid to the U.S. economy and those who are responsible for its growth and productivity.
  • Potential interest rate increases: Depending on the effectiveness of the new COVID-19 vaccines, the economy may see a real recovery in the second and third quarters of 2021. This could lead to interest rate increases that could affect residential and commercial borrowers alike. If the recovery does arrive, many investors and businesses may find higher interest rates waiting for them on the other side.
Potential interest rate increases
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Now May Be the Time to Borrow

Even in the current unsettled economy, finding ways to obtain the necessary funds for expanding your business or investing in new properties and opportunities is critical to your success as a commercial investor. Taking advantage of the historic low rates currently in place will help you to avoid the risk of higher interest rates in the new year. Working with an alternative lender will typically provide you with the flexibility and speedy response times you need to make the most profitable investments.

At ReProp Financial, we offer specialty finance solutions for residential and commercial loans. Give us a call today at 1-800-444-2948 to discuss your needs or to submit a loan to us. We look forward to the opportunity to serve you now and in the future!

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