7 Predictions For Loot Box Investors In 2021 (And Beyond?)
Soaring stock valuations, mental healthcare demand, green energy growth and tech regulation underpin my approach to the markets going into the new year.
2021 has started with a bang. The first full week of the year has already shown us that basically anything can and will happen. Despite this I’d like to try and make a few predictions to help young investors navigate the year ahead and to provide some insight into how I’m approaching the markets…
1/ I expect US equity markets to drive higher based on expanding valuation multiples rather than fundamentals / actual performance. What do I mean by this? I mean company stocks will rise because investors are willing to pay more for stocks regardless of how they perform. This is driven by three main factors…
Record low interest rates - With money cheaper than ever to borrow businesses are able to access more capital to fuel growth
Record low bond yields - Bonds offer investors such a low yield that investors will continue to gravitate towards stocks and other risk assets because they’re the only place investors can get yield
Record liquidity - With the Democrats in control and the virus continuing to pressure business it’s likely that we’ll see significantly more fiscal stimulus. Some of this money will certainly find its way into brokerage accounts.
2/ The aforementioned expanding valuation multiples will make investors (particularly institutions) nervous. There will be a general fear of heights. I expect a lot of concerns that the market is in a bubble from pundits. And maybe they’ll be correct! Eitherway this will eventually cause a handful of significant broad market corrections (10%+). These will be buying opportunities for long term buy and hold investors, which is the investing principle I practice and recommend.
3/ Amazon reaches $4,000 a share.
4/ Demand for mental healthcare to go through the roof due to the impact of the pandemic on the lives of the most vulnerable. Hell, even some of the middle class and employed are going to need therapy to come to terms with having been locked at home worried about the health of themselves and their loved ones for over a year. My mental healthcare investment stock is Arcadia Healthcare Company ($ACHC) which offers mental healthcare in the US and UK.
5/ Transport and travel stocks to enjoy a slow but steady rebound starting in Q2 and grinding higher through Q4.
6/ The Democrats will kickstart a big green energy push driving energy and ESG stocks through the roof. This movement towards green energy has the potential to be as big as the industrial revolution with the urgency and speed of the digital revolution. There’s no shortage of green energy companies to look at but the ones I’m I have positions in include NextEra ($NEE), Brookfield Renewable Partners ($BEP) and ITM Power (£ITM.L)
6/ Big tech finally gets its wings clipped by regulators - Facebook is likely going to be the hardest or the first hit, particularly in light of Zuck’s tacit lowkey support of the Trump administration which will be a concern to the incoming administration.
7/ Despite an astronomical P/E ratio of 726 (this means investors are willing to pay $726 for every one dollar of earnings) I expect Shopify will continue to succeed and grow as the world continues to pivot from physical retail to ecommerce. With the exception of Amazon, there’s simply no company better positioned to take advantage of this moment than Shopify ($SHOP).
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Until next time - CT