In 2020, investors experienced about a decade’s worth of volatility crammed into a single year. The unprecedented uncertainty surrounding the coronavirus disease 2019 (COVID-19) pandemic sent the S&P 500 (SNPINDEX: ^GSPC) screaming lower by 34% during the first quarter, only to see the index finish the year higher by a double-digit percentage.
Suffice it to say, many long-standing records were tossed by the wayside last year.
Unfortunately, a new year doesn’t necessarily mean an end to the unprecedented volatility. There are 10 viable reasons the stock market could crash, once again, in 2021.
1. Vaccine efficacy hype misses the mark
Though Pfizer/BioNTech and Moderna wowed the research community with respective vaccine efficacy (VE) of 95% and 94.1%, the investment community is looking forward to other drug developers reporting their COVID-19 VE results in the first quarter. This includes Johnson & Johnson (NYSE: JNJ), whose vaccine is administered in a single dose, as opposed to two doses with virtually all other COVID-19 treatments. If Johnson & Johnson’s vaccine doesn’t deliver exceptionally high VE, doubt about ending the pandemic in 2021 could creep in and push the market notably lower.
2. Not enough people receive a COVID-19 vaccine
Another reason the stock market could crash in 2021 is if too few people choose to get a coronavirus vaccine. Though estimates vary, Dr. Anthony Fauci has suggested that anywhere from 75% to 90% of the U.S. population would need to receive the vaccine to develop herd immunity. That’s a troublingly high figure, especially when most surveys have shown that only between 50% and 70% of those questioned plan to get the vaccine. Without herd immunity, a return to “normal” may not be possible in 2021.
3. COVID-19 variants accelerate a new round of shutdowns
Less than three weeks ago, a new variant of the SARS-CoV-2 virus, which causes COVID-19, was identified in the United Kingdom. The mutability of the virus has the potential to cause serious problems. For example, differences in transmission or mortality rate could induce strict lockdowns that further ravage the economy. It’s also possible that emergency use-approved and experimental vaccines may prove ineffective or less effective against new variants of the virus.
Fear of the unknown crushed the S&P 500 in March, and it could do so again in 2021.
4. The Georgia Senate runoff yields a surprise
Politics might also be the market’s undoing. In just two days (Jan. 5), Georgia’s residents will head back to the polls to determine which two candidates should…