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A year as financially bizarre as 2020 can only be followed by a period of readjustment. So prepare yourself for some surprises on the way back to normalcy – or at least to a new normal – in 2021. Here are four predictions of what may lie ahead for the personal finances of the country:

A lot of investors will find their magic touch deserts them

Say goodbye to the stock market’s year of the checkmark – stocks started fine in 2020, plunged for about four weeks in the winter and then surged back. If you put money into the market anywhere near the low point, you made out brilliantly. And so you should have – you did exactly the right thing in buying low.

Don’t expect a gimme like that anytime soon. One reason stocks did so well while a pandemic raged is that investors were looking ahead to a quick vaccine rollout and economy recovery. A lot of great news has been priced into the stock market.

Low interest rates will continue to make stocks look attractive compared with bonds. But any sign the economy isn’t bounding back into prepandemic form could upset investor expectations.

The participation level of retail investors was the stock market story of the year in 2020. Human and digital advisers reported massive surges in new account signups, and online brokers were swamped by the volume of clients who wanted to trade or speak to a live representative on the phone.

A message to all these newbies: Keep investing with an eye on the long term – 10 years or more – but expect some adversity ahead.

A reckoning on household food spending

A mid-December report from RBC Economics showed that grocery spending was up almost 20 year cent on a year-over-year basis, while restaurant spending was down 27 per cent. A question for 2021: How will households manage their grocery outlays while ramping up their visits to restaurants and bars as the economy opens up again? Will we have to go on a food-spending diet?

Food inflation complicates this spending quandary. Dalhousie University’s 2021 food price report predicts a 5-per-cent jump in food costs, which works out to a 12-month total of $695 for a family of four. In The Globe and Mail’s Stress Test personal finance podcast, Sylvain Charlebois of the Dalhousie Agri-Food Analytics Lab says an era of cheap food is ending.

One of the most-watched economic indicators of the next year or two will be the inflation rate. Whether a broad-based rise in inflation occurs, rising food prices are already a reality in one form or another. Just look at how there aren’t as many items on sale in grocery stores.

A push to spend, not save

The forecasters at Capital Economics estimate that households will have parked an extra $200-billion in savings by the end of 2020 because of reduced spending in areas such as daycare, travel and entertainment, as well as government financial support programs.

Getting some of that money flowing into the economy would help with so much in 2021 – revenue for businesses and thus jobs for workers, sales tax revenue for governments and thus smaller deficits (or increased spending).

Federal Finance Minister Chrystia Freeland mused in December about ways to get parked savings into the economy (she called it “pre-loaded stimulus”), which generated some backlash from people who are nervous about the government eyeing their cash. But while an elevated level of savings remains prudent, some of this money could be used more productively if spent or invested.

Personal finance columnists don’t usually urge people to spend, but let’s make a limited exception for 2021. If you’re financially solid, spending some money on goods or services is a public service.

Plan now for your extravagance ahead. Fear of scarcity in a locked-down economy drove a run on toilet paper, flour, pasta and other staples in the spring. Might there be an opposite effect as the economy reopens – a surge in demand for the physical proximity of attending a concert, taking a cruise, visiting a crowded bar or eating at a popular restaurant?

The pandemic has been a two-track economic phenomenon since the get-go – the financially damaged who lost jobs and income and the financially fortunate who have the cash and hunger to spend but not the opportunity. With vaccinations under way, it looks like opportunity will knock in 2021.

Frustration for first-time home buyers

The pandemic was bad for housing affordability, and things look to get worse in 2021. Housing was powered to a large extent by falling interest rates, which won’t fall further in the year ahead unless the economy takes a disastrous turn for the worse. Meantime, forecasters are calling for average price increases in the 5-per-cent to 6-per-cent range.

A buoyant market could place Toronto alongside Vancouver as a city where the average cost of a home is $1-million or more. Halifax seems poised to cross into the $400,000 range for average prices. Kamloops, B.C., is on the verge of crossing the $500,000 mark. And Ottawa has a chance of getting to the $600,000 range.

There are bunches of affordable small communities across the country, but the desire to move to these locations could decline as the pandemic disappears. A reopened economy deconstructs the pandemic paradigm of home buying, which is to take advantage of remote work and range far afield to find spacious housing.

If urban living makes a comeback in 2021, a lot of young buyers are going to find it unaffordable. Rents fell in pricey cities such as Vancouver and Toronto during the pandemic, offering some much-needed relief if you couldn’t afford a house or didn’t want to own. Expect rents to start rising again as more people return to work.

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