2021 Stock Market Forecast
January 3rd, 2021...
This space is usually reserved for the Week in Review in One Minute. However, this week, we provide our 2021 market forecast.
The Bull Market Continues
We think this bull market, powered by an improving economy, low interest rates, and Fed stimulus, produces strong 2nd half 2021 corporate earnings. As we constantly remind readers, the market is a window into an economy a year out.
The tech heavy NASDAQ was up +43% in 2020. That's not sustainable. Tech did well during the pandemic as homebound consumers ordered goods, attended school, and procrastinated online. We're not suggesting tech goes negative in 2021, as tech always leads economic expansion. But investing in Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), Tesla (NASDAQ: TSLA), and Amazon (NASDAQ: AMZN) as your primary 2021 strategy is risky. Bet the Small Cap Russell 2000 Small cap stocks tend to lead recoveries, as investors flock to large dividend paying conservative companies during recessions. The Russell is up 20% in the last few months and expect that to continue.
The S&P 500 Will Rise 7% While small caps will lead, more money into the system means more corporate buy backs. Stock buybacks reduce float / shares outstanding - increasing stock prices. The large dividend payers with strong cash flow are a really good 2021 hedge. Think AT&T (NYSE: T) - which pays a 7% annual divided. Oil Finishes 2021 Over $65 a Barrel Consumer spending snaps back pushing travel, hospitality, and tourism stocks higher. This includes hotel companies, airlines, and oil (energy). Bet the Housing Market The Fed will maintain near zero percent rates to insulate the economy from unforeseen challenges that could arise as we come back from COVID. Housing stocks will benefit. If Dems Control, All Bets Off History demonstrates that markets prefer split governments. That's because we don't get policies too far left or too far right. Markets like stability. If the presidency and Congress is controlled by one party, market volatility usually rises.
Oh, and the Kansas City Chiefs win the Super Bowl...again.
And that’s your one minute weekly market scoop.