Analyses
Now It Gets Tougher
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2021 Outlooks
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janvier 11, 2021
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janvier 11, 2021
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Now It Gets Tougher |
In my opinion, equity returns post-covid are going to be tougher to generate than while we remain in the midst of this horrible pandemic. Strange I know, but equity returns do not necessarily line up with the current state of the economy.
However, before we go into detail about why 2021 will be a more challenging year, let’s quickly review the past year. In my opinion, there were three very powerful investment lessons from 2020:
As I am fond of saying, I firmly believe complexity creates readership and viewership, but more often than not, investing is more straightforward. “Simplicity, while rarely intellectually satisfying, is hard to beat in this business.”1
Keeping these important lessons in mind, let’s now turn to what we see as we begin our much-anticipated new year.
1. AS A BACKDROP, 2020 WAS A CLASSIC FIRST YEAR COMING OUT OF A RECESSION. EERILY SIMILAR TO 2009.
2. WE EXPECT 2021 TO BE SIMILAR TO 2010 FOR THE MARKET: THE SECOND YEAR OF A NEW BULL MARKET.
3. 2010’S VOLATILITY WAS CAUSED BY A GROWTH SCARE. IN CONTRAST, 2021 COULD BE CAUSED BY A GROWTH BOOM:
4. THERE IS A SUBSET OF GROWTH STOCKS THAT ARE AS HIGHLY PRICED AS AT THE TOP OF THE TECH BUBBLE IN 2000.
5. VALUE STOCKS, HOWEVER, REPRESENT A COMPELLING OPPORTUNITY.
Past performance is no guarantee of future results. The index performance is provided for illustrative purposes only and is not meant to depict the performance of a specific investment.
6. US DOLLAR DEPRECIATION IS A POSITIVE FOR EMERGING MARKETS AND ESPECIALLY ASIA.
My conclusion for 2021? We believe it will be an overall good year for equities, but BUCKLE UP!!! That would be consistent with the second year of a bull market.
Call it simplistic, but you know what I think about simplicity.
Risk Considerations
There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio may be subject to certain additional risks. In general, equities securities’ values also fluctuate in response to activities specific to a company. Stocks of small-and medium-capitalization companies entail special risks, such as limited product lines, markets and financial resources, and greater market volatility than securities of larger, more established companies. Investments in foreign markets entail special risks such as currency, political, economic, market and liquidity risks. Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility.
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Head of Applied Equity Advisors Team
Applied Equity Advisors Team
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