While 2020 has been a challenging year economically, particularly for a region like ours where important economic drivers like defense and aerospace manufacturing, healthcare and construction have been impacted by the prolonged pandemic, there’s optimism about our future. Manufacturing jobs are stabilizing and jobs in Tucson are in an overall positive state of recovery that is approaching pre-COVID levels of February 2020. The strength and resiliency of Tucson businesses, from the ingenuity of our local entrepreneurs pivoting operations and services, to the outpouring of generosity and support from the greater community, makes Tucson well positioned to come out of the pandemic a stronger city.
At a national level, Bank of America Global Researchers have a 2021 year-end S&P 500 target of 3800, implying a 6% upside from current levels. Near-term risk is likely skewed to the downside. We believe that value will outperform growth in 2021. With respect to sectors, we are recommending overweighting financials, energy, technology, and healthcare. We are recommending an underweight in staples, communication services, and real estate.
The biggest economic challenge we’ll face locally is our relative unemployment and its impact on consumer spending and morale. As of October, Tucson had an unemployment rate of 8%, according to a forecast update from economists at the University of Arizona. The pandemic has affected all of us, but it has clearly taken a proportionally larger toll on our business community. The ripple effects of unemployment and business closures—short term and permanent—have been felt throughout the region’s economy and will likely get worse before it gets better. But our community has proven time and again to be incredibly resilient.
Resiliency has been a top priority for our business bankers here in Tucson, and we’ve been proactively working with our business clients since the pandemic hit and will continue to do so in the new year. By looking at things like cash management, credit management and working capital as well as doing stress tests and sensitivity modeling to see how long their cash will last under different scenarios, we have helped companies become more resilient and better positioned for the new year ahead.
I’m confident that the lessons we’ve learned from the pandemic will create changes and innovations for the better in the long run.
Adriana Kong-Romero is commercial business executive and Tucson market president for Bank of America.