Over the Thanksgiving holiday, I\u2019d be willing to venture\nthat many dinner conversations included \u2018investing in vaccine stocks,\u2019 or perhaps\nsome chatter about Tesla\u2019s meteoric rise and inclusion into the S&P 500. Others\nmay have discussed the flashy Airbnb and DoorDash initial public offerings (IPOs)\nthat just took place, with some of the younger folks gloating about their new\nRobinhood trading accounts. <\/p>\n\n\n\n
My point here is that I\u2019m sensing a growing enthusiasm not for\ninvesting, <\/em>but for trading. <\/em>The two are different. I see\ninvesting as a long-term endeavor, executed in a research intensive and\nrisk-controlled manner consistent with a person\u2019s long-term goals. Trading is what\npeople do in an effort to make fast money, with decisions often based more on\nhype (vaccines, bitcoin, IPOs) than on research. <\/p>\n\n\n\n _________________________________________________________________________<\/p>\n\n\n\n Preparing for Your Long-Term Investment Goals! <\/a><\/strong><\/p>\n\n\n\n It\u2019s evident that the market is constantly changing \u2013\nespecially with the COVID vaccine being approved and enthusiasm for trading\ngrowing with excitement surrounding new IPOs. Still, there is so much economic\nuncertainty and many unknowns surrounding the pandemic and potential vaccines. Instead\nof getting caught up in the short-term volatility, I recommend focusing on the\nlong-term outlook. This means focusing on hard data and economic indicators to\nhelp guide your investments for what\u2019s ahead. <\/p>\n\n\n\n To help you do this, I am offering all readers our\njust-released Stock Market Outlook report. This report contains some of our key\nforecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 _________________________________________________________________________<\/p>\n\n\n\n When Airbnb and DoorDash went public last week, both stocks\nwere massively oversubscribed, in what appeared to be major buy-in from the\nretail trading community. Airbnb opened on Thursday at $146\/share, more than\ndouble its $68 IPO price and marking one of the biggest opening day rallies\never. This gave the company a valuation over $100 billion, even though for first\nnine months of 2020 it posted a net loss of $697 million on $2.5 billion in\nrevenues.2<\/sup> Paying a premium for future growth is what investing is\nall about \u2013 but where\u2019s the limit?<\/p>\n\n\n\n There are a few sentiment models out there \u2013 most notably\nthe Citigroup Panic\/Euphoria Model \u2013 flashing signs of market optimism and\neuphoria. The American Association of Individual Investors (AAII) found in its\nmost recent December survey that 48.1% of investors identified as being\nbullish, which is well above the historical average of 38%.3<\/sup> In\nshort, there is growing evidence that investors are becoming more optimistic\nand confident, which in my view tends to make the market more vulnerable to\nselling pressure. Seeing as there has not been a correction of -10% or more\nsince the March lows, I think we\u2019re due for one soon.<\/p>\n\n\n\n Indeed, upside volatility tends to invite downside\nvolatility, particularly in areas of the market that performed the best off the\nbottom (so far in this cycle that\u2019s growth and Technology). I\u2019m seeing a\nclassic tenet of stock market investing playing out now \u2013 just as investors get\ncomfortable with a rally, the equity market finds a way to deliver a reality\ncheck. The market never fails to test investor patience, and I think we should\nexpect a sharp pullback in the first half of 2021 to weed-out some of this\nnewfound enthusiasm and optimism. <\/p>\n\n\n\n If a\ncorrection does in fact happen next year, it should not come as a surprise. If\nyou look at the S&P 500 over the last 40 years (1980-2020), you\u2019ll find\nthat not only are corrections frequent, they\u2019re\nthe norm<\/em>. The average intra-year correction for the S&P 500 since 1980\nis -13.8%! In fact, it\u2019s very rare to get a year where the S&P 500 doesn\u2019t\nfall at least -5% at some point within the twelve-month period. It\u2019s only\nhappened twice in the last 38 years (1995 and 2017), when the S&P 500\ndeclined just -3% intra-year. 4<\/sup><\/sup><\/p>\n\n\n\n In 2021, I think we\u2019re going to see a correction more in-tune with the longer-term average, and I think it would be wise for investors to brace for it. Having a diversified portfolio is a good place to start. I think a correction and a subsequent bounce-back could generally favor some of the underperforming sectors and styles in the equity markets, with capital rotating from high valuation names to low valuation names. At Zacks Investment Management, I think our All-Cap Core Strategy could be well-suited for the volatility and rotations I expect next year. We buy stocks with improving fundamentals and sell stocks with deteriorating fundamentals, with no particular allegiance to growth or value or any style. In past years, All-Cap Core has been successful at limiting downside capture, which I think could be valuable to investors in 2021. Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n There\u2019s an old Wall Street adage that investors should \u201cbuy\nthe rumor and sell the news.\u201d In the realm of the vaccine, this adage may have\nalready played out \u2013 investors rushed into stocks on news of the vaccine\u2019s\ndevelopment and approval, and they may end up selling when the vaccine is\nactually distributed. I think the \u201csell the news\u201d side of the equation will\nland in the first half of 2021.<\/p>\n\n\n\n At the end of the day, however, an investor with a\nwell-diversified portfolio aligned with their goals should not have much to\nworry about. A sell-off may provide a strategic opportunity to rebalance your\nportfolio, or if your asset allocation needs adjusting based on a change to your\nlong-term goals or needs, a correction may be a good time to consider implementing\nit. Otherwise, I think it is good to mentally prepare for a correction, so you\ncan avoid any knee-jerk reactions when it arrives. <\/p>\n\n\n\n
IT\u2019S FREE.\u00a0Download the Just-Released January 2021 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n
<\/p>\n\n\n\n