Subscribe to receive this FREE daily commentary directly in your email
12/25/20
Mike’s Reading The Markets (RTM) Premium Content – Get An Extra 20% Off Thru January 1.
- RTM MORNING NOTE- Rising Yields Are The Biggest Risk To Stocks – Don’t Discount It
- RTM Midday- Testing Resistance – Big Level
- RTM MORNING NOTE- S&P FUTURES STRUGGLING AT 3,690
- RTM MIDDAY: What Will Keep Stocks Rising?
- RTM Morning Note – Betting Big In Square
- RTM-MIDDAY: GAP FILLING ALGO’S, TRENDS LOWER
- RTM Options Analysis – AMD Seeing Bearish Betting
In this year’s write-up, I will review my 10-predictions for 2021. Clearly, anything can happen, but there is a point to this exercise, which helps me layout a game plan and thought process for the path that may lie ahead this coming year.
10) The global economy contracted in 2020 due to the coronavirus pandemic. But with a vaccine being rolled out, there is hope and optimism that the virus can be contained and controlled. It should lead to a better than expected GDP growth rate here in the US, approaching 5%.
9) Faster than expected GDP and lower comparables will give the illusion of higher inflation rates in the first half of 2021. However, the second half of 2021 will prove to be more challenging as inflation rates normalize and fall below the Fed’s long-run average rate of 2%.
8) Higher GDP growth and faster inflation rates will lead to higher 10-year yields in the first half of 2021. The yield will approach 1.5%, steepening the yield curve dramatically.
7) Higher Yields in the US, faster growth, and stronger inflation will result in the US dollar strengthening. After struggling below 91 on the dollar index in the first half of the year, it will rise back to 96 in the second half of 2021. The strong dollar will help to halt rising inflation in the second half of 2021.
6) Higher inflation rates in the first half of the year and fears over the dollar’s debasement will result in gold prices rising in the first half of 2021 to nearly $2,300, a record. However, as inflation normalizes, gold will retrace, and give back all of its gains and finish lower on the year.
5) Platinum may be the metal to watch as the auto sector recovers and production returns. It will result in higher demand for the metal as it is used in the catalytic converter and emission controls, and right now, it is the cheapest of its peers Palladium and Rhodium. It means that platinum soars to around $1,600.
4) Rising rates will hurt the technology sector in the first half of 2021, as the sector has already seen a tremendous amount of multiple expansion due to the low rate. But rising rates mean that this sector’s valuation will be too high, resulting in lower equity valuation, before recovering by the end of the year.
3) Faster GDP Growth, higher inflation, and a steeper yield curve will make the traditional money center banks the best performing sector for the first half of 2021.
2) Better than expected GDP, faster inflation, and higher bond yields will result in investors worrying that the Fed will raise rates much sooner than expected. The Fed will hold to its word and not raise rates in 2021 by calling the rising inflation rates as transitory, remaining committed to low rate and its bond-buying programs.
1) The S&P 500 will struggle in the first half of 2021, something nobody is expecting. Worries over Fed tightening or reduced bond purchases due to rising inflation and higher yields will contract the S&P 500 earnings multiple.
The S&P 500 earnings yield is currently around 5.25% based on 2022 earnings estimates. However, it will rise to 6%, its previous lows, sending the S&P 500 PE ratio to around 16 based on my 2022 earnings estimates of $193. This will send the S&P 500 back towards 3,050. However, as fears subside and inflation rates fall and return to below the Fed’s target, the S&P 500 will recover and finish the year higher at 3,860, a gain of over 4% for the year.
I will review these and some other thoughts in a video segment for subscribers on Monday or Tuesday.
Here’s to a much better and happier 2021.
-Mike
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.
Subscribe to receive this FREE daily commentary directly in your email
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
Comments are closed.