{"id":9229,"date":"2021-01-18T06:14:07","date_gmt":"2021-01-18T06:14:07","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9229"},"modified":"2022-02-26T13:05:58","modified_gmt":"2022-02-26T13:05:58","slug":"will-the-bull-market-continue-in-2021","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/will-the-bull-market-continue-in-2021\/","title":{"rendered":"Will the Bull Market Continue in 2021?"},"content":{"rendered":"\n<p>2020 was a\nyear beset by a public health crisis, civil unrest, political dysfunction, and\nuncertainty across just about every facet of life. Yet the S&amp;P 500 still posted\na stout +18.4% return for the year, following a powerful +31.5% surge in 2019.<sup>1<\/sup>\nNever mind the fact that there was a global pandemic, more political\nuncertainty than usual, and a steep and scary bear market all wedged in\nbetween. <\/p>\n\n\n\n<p><strong>The S&amp;P 500 Priced-In the Downturn\n\u2013 and the Odds of a Powerful Recovery \u2013 In Record Time<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/11_pic1-1-1024x395.png\" alt=\"\" class=\"wp-image-9231\"\/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>2<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>Long-time\nequity investors recognize this pattern, whereby the stock market seems to defy\nall expectations and looks totally disconnected from reality. Some onlookers\nmay think something is wrong, or out of whack. But history tells us this type\nof \u2018disconnect\u2019 happens all the time. The stock market has no emotional\nconnection to what is happening in the moment \u2013 it is always looking ahead to\nwhat\u2019s next, in my view. In 2021, it sees accelerating earnings, solid GDP\ngrowth, and a wall of liquidity. <\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_01_18&amp;content=stock_market_outlook_report \">How Long Can the Bull Market Last in 2021?<\/a><\/strong><\/p>\n\n\n\n<p>After the rollercoaster of 2020, the beginning of 2021 has\nprovided investors with record highs. But many investors may be wondering how\nmuch more upside is possible in 2021, and if a crash is on the horizon. Having\nuncertainties and fears is normal, but instead of focusing on these\nuncertainties, I recommend focusing more on the hard data and economic\nindicators that could impact your investments in the long-term.<\/p>\n\n\n\n<p>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<ul class=\"wp-block-list\"><li><em>Economic expectations for 2021<\/em><\/li><li><em>2021 capital markets expectations<\/em><\/li><li><em>A look at Covid-19 and vaccine distribution<\/em><\/li><li><em>What produces 2021 optimism?&nbsp;<\/em><\/li><li><em>What of U.S. GDP growth?<\/em><\/li><li><em>A look at U.S. continuing claims for unemployment and Covid job data<\/em><\/li><li><em>Zacks Rank S&amp;P 500 Sector Picks<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>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!&nbsp;<br> <strong><br>IT\u2019S FREE.&nbsp;<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_01_18&amp;content=stock_market_outlook_report \">Download the Just-Released February 2021 Stock Market Outlook<\/a><sup>3<\/sup><\/strong><\/p>\n\n\n\n<p>__________________________________________________________________________<\/p>\n\n\n\n<p>So, what will the bull market look like in 2021? I\u2019ve been\nthinking about the post-World War II bull market, the \u201cv-shaped\u201d recovery off\nthe financial crisis bottom of 2009, and the late-cycle risk binge we saw in\n1999. &nbsp;<\/p>\n\n\n\n<p>The World War II comparison is interesting. In that time,\nthe nation was of course gripped by uncertainty, division, and broad worry\nabout the future. The government also ran record deficits in order to finance\nthe war, with the Fed and Treasury setting government bond yields to establish\nan upward sloping yield curve. <\/p>\n\n\n\n<p><strong>Record Debt as a\nPercentage of GDP: WWII and Today<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/7_pic2-1024x395.png\" alt=\"\" class=\"wp-image-9230\"\/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>The stock market struggled in the early months of entering\nthe war, but after a 1942 military success in the Pacific, the \u201cv-shaped\u201d\nbounce took hold \u2013 even as the bulk of the war and all the casualties it caused\nwere yet to occur. I see quite a few similarities to 2020, and can imagine\ninvestors being perplexed in 1942 at how the market could rise during such a\ndevastating time. &nbsp;<\/p>\n\n\n\n<p>The early-cycle recovery in 2010 also bears some resemblance\nto what we\u2019ve seen late in 2020 and early 2021 \u2013 a capital rotation into small,\nvalue, and cyclical categories. Interestingly, the bounce off the bottom in\n2020 favored mainly high growth, high valuation Technology and Consumer\nDiscretionary categories, which is where I see some resemblance to 1999. <\/p>\n\n\n\n<p>The \u2018risk binge\u2019 we saw tied to the dot com craze in 1999 pushed\na lot of investors very far out onto the risk curve, paying exorbitant premiums\nfor the possibility of supercharged future cash flows. Most of those cash flows\nnever arrived. Technology companies are different today, in my view \u2013 the\nearnings growth is there. But that does not mean investors are paying fair\nprices. I think 2020 delivered an ultra-compressed cycle in Technology, where years\nof future profits were priced-into stocks in a matter of months. To the extent\ninflation later in the year pushes longer-term interest rates higher, I also\nthink we could see a reality check for the Technology sector. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>The stock market is fully valued, trading near 23x forward\nearnings. The peak in 2000 saw a P\/E of 26x. Many investors may wonder how much\nmore upside is possible, just one year into the bull market.<\/p>\n\n\n\n<p>But there is a significant difference between today and the\nlate 1990\u2019s: interest rates. I have written before that as long as investors\nexpect interest rates to remain low, they will likely be more willing to pay\nhigher premiums to own equities. In 2021, I think investors will favor equities\nwith more attractive valuations, and will look for companies with the ability\nto accelerate earnings (i.e., companies with low 2020 comparisons). Finally, to\nthe extent that inflation later in the year could push longer-term interest\nrates higher, I think we could see some selling pressure in high valuation\ncategories, like Tech. More on that in a future column. <\/p>\n\n\n\n<p>Instead of trying to guess how much upside is possible and try to time the market, I recommend staying focused on what matters &#8211; key data points and economic indicators that could impact your investments. To help you do this, I am offering all readers our&nbsp;<strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2021_01_18&amp;content=stock_market_outlook_report \">Just-Released February 2021 Stock Market Outlook Report.&nbsp;<\/a><\/strong><\/p>\n\n\n\n<p>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<ul class=\"wp-block-list\"><li><em>Economic expectations for 2021<\/em><\/li><li><em>2021 capital markets expectations<\/em><\/li><li><em>A look at Covid-19 and vaccine distribution<\/em><\/li><li><em>What produces 2021 optimism?&nbsp;<\/em><\/li><li><em>What of U.S. GDP growth?<\/em><\/li><li><em>A look at U.S. continuing claims for unemployment and Covid job data<\/em><\/li><li><em>Zacks Rank S&amp;P 500 Sector Picks<\/em><\/li><li><em>And much more<\/em><\/li><\/ul>\n\n\n\n<p>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!<br><br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>To analyze what&#8217;s ahead for the market, Mitch looks at some historical comparisons <\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9229","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9229","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9229"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9229\/revisions"}],"predecessor-version":[{"id":10478,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9229\/revisions\/10478"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}