Market Pulse: New Year’s predictions
Special to the Tribune
At this time of year many market analysts make their predictions for the next 12 months. They make for interesting copy, but don’t read too much into them. In most cases their record is not good. Here’s my safe prediction for 2021: Stocks will be volatile.
Now some more:
Prediction 1 — The 2021 senate buzzword will be austerity. Having followed politics for more years than I want to admit, I’ve learned that the Democrats never worry about deficits and debt while the Republicans are only concerned with debt when they aren’t in power. With Biden as president, expect the Republicans in Congress to worry about mounting debt once again, just as they did when Obama was in office. The “austerity” word will be used as Republicans try to control spending.
Prediction 2 — Rising interest rates will pressure the Fed’s low interest rate policy. The Fed controls short-term rates while long-term rates are controlled by the market. Fed Chairman Powell said rates will remain near zero through at least 2023, but an accelerating economy with growing demands for credit will put upward pressure on long-term rates. Expect the Fed to cite improving growth prospects as a reason to reconsider its low interest rates stance.
Prediction 3 – Tesla will underperform. In 1998-99 the Nasdaq Composite was very strong and Amazon gained 1,400%. Similarly, in 2019-20 the Nasdaq soared and Tesla rose 900%. Amazon stalled for a few years after its big move and Tesla will stall as well. Investing isn’t as easy as simply buying Tesla.
Prediction 4 — Solar will outperform. I’m not a fan of buying into hype. When everyone was talking about bitcoin in 2017 and marijuana stocks in 2018 I had no interest. That’s also why I’m not a buyer of Tesla. But solar stocks were especially strong in 2020 and few are talking about it. These volatile stocks should continue to do well … until CNBC highlights solar more.
Prediction 5 — The economy in 2021 will show the strongest growth in at least 14 years. This isn’t a bold prediction. The “Roaring 20s” followed the 1917 flu pandemic. Similarly, after more than a year of lockdowns and social distancing, people will be more than ready to travel and spend. The economy grew 3% in 2018. Expect far more in 2021.
David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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