1<\/sup><\/strong><\/p>\n\n\n\n_________________________________________________________________________<\/p>\n\n\n\n
Leadership started to change in November, however, with\npositive vaccine news and diminishing uncertainty with regards to the election,\nvalue stocks took over, and I think we could see sustained leadership heading\ninto the new year. Cyclical value stocks \u2013 which are closely tied to economic\ngrowth and currently enjoy low relative valuations \u2013 have not seen the type of\nrally that growth has delivered. This dynamic could change in the new year, as\nit is common to see leadership shift around early in a new cycle. <\/p>\n\n\n\n
Long-time readers of my columns also know the emphasis that\nZacks Investment Management places on earnings, which could also benefit value\nin 2021. Value stocks are likely to have an easier time delivering big\nyear-over-year earnings growth, considering the dismal comparisons from the\nprevious year (2020). As many \u2018growth-y\u2019 tech stocks enjoyed strong earnings\neven during the 2020 recession, the bar is already set high for 2021 \u2013 setting\nup the possibility for lower-than-expected earnings growth.2<\/sup><\/p>\n\n\n\nTrend #2: More\nFrequent Pullbacks and Classic -10% to -20% Correction<\/strong><\/p>\n\n\n\nThe stock market defied many expectations in the second half\nof 2020. A sharp, \u201cv-shaped\u201d bounce off the bottom of a bear market is one\nthing. But to finish the year with a sustained rally even as election\nuncertainty crested and the pandemic accelerated into dangerous territory was a\nsurprising outcome. I have written many times that the stock market looks ahead\nsix or even twelve months, and I think the rally was pricing-in a strong\nrecovery in the second half of 2021.<\/p>\n\n\n\n
Even still, we saw the top five S&P 500 stocks generate\n127% of index\u2019s return in the first nine months of the year, signaling quite a\nbit of concentration. We also saw fairly wild investor enthusiasm for IPOs, and\nmany signals that retail investors are pushing far out onto the risk curve (see\ncryptocurrency rally and surge in online trading on platforms like Robinhood). <\/p>\n\n\n\n
Towards the end of the year, it felt as though the buzz\naround what stocks or cryptocurrencies to buy was growing quickly, telling me\nthat sentiment was starting to drift into being far too optimistic and \u2018risk-on.\u2019\nIn my view, that\u2019s a clear signal that a sharp correction is coming soon, and I\nalso think pullbacks should be more routine as the market clears out some of\nthe froth. <\/p>\n\n\n\n
Trend #3: Go Global <\/strong><\/p>\n\n\n\nThe United States is poised for breakout economic growth in\nthe second half of 2021, in my view, but many other countries are already\nthere. Australia, South Korea, New Zealand, and China have all but squashed out\nthe Covid-19 pandemic, and their respective economies are firmly on the path\nback to sustained recovery. China looks to be leading the way so far. <\/p>\n\n\n\n
When it comes to China, however, it appears the rivalry with\nthe United States is here to stay. Nowhere will the competition become fiercer\nthan in the realm of technology, as both countries seek self-sufficiency in\ncritical industries of the future, like Artificial Intelligence,\nsemiconductors, and 5G. Investors would be wise to look both ways when it comes\nto investing in growth trends, as the two economic superpowers chart their own\ncourses. <\/p>\n\n\n\n
In Europe, the European Central Bank has committed to more\nstimulus, and the bloc\u2019s recovery is said to focus more on green infrastructure\nand digitization spending. In terms of going where the liquidity is, Europe\nwill certainly be a place to look, in my view. Fading Brexit uncertainty should\nalso provide a tailwind.<\/p>\n\n\n\n
Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\nI think there is a lot to look forward to in 2021, and\ninvestors should position portfolios towards equities \u2013 but only as far as your\nrisk tolerance and long-term objectives allow. It is also, of course, important\nto remain diversified. <\/p>\n\n\n\n
I do believe that investor optimism may be moving a bit too\nquickly, however, and the risk-taking I\u2019m seeing is likely to give way to more\nfrequent volatility and likely a correction that will feel like another bear\nmarket (sharp, sudden, scary). Staying patient, focused on the long-term, and\nbiased towards quality and earnings should serve investors well in the new\nyear. <\/p>\n\n\n\n
To help better position yourself for what\u2019s to come in this new year, I recommend focusing on key data points and economic indicators that could positively impact your investments in the long-term. To help you do this, I am offering all readers our\u00a0Just-Released January 2021 Stock Market Outlook Report.\u00a0<\/a><\/strong>
\u00a0
This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n- A look at the current Covid-19 situation and its impacts<\/em><\/li>
- U.S. returns expectations for 2021<\/em><\/li>
- Update on U.S. fiscal stimulus<\/em><\/li>
- A look at U.S. earnings and GDP growth rates in 2020 and what to expect for 2021<\/em><\/li>
- Zacks Rank S&P 500 Sector Picks<\/em><\/li>
- What produces 2021 optimism?\u00a0<\/em><\/li>
- And much more<\/em><\/li><\/ul>\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!
<\/p>\n","protected":false},"excerpt":{"rendered":"
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