This morning, the markets dipped as we continue to weigh mixing sentiment between pending stimulus and rising virus cases.
I hate to say it, but this is how it will likely be through December.
But moving into 2021, a wealth of catalysts should provide an improved economy, stronger market, and greater upside for some of my favorite stocks. These favored companies include a few that will appear on my Watch List today.
This week, I am beginning to put pen to paper on my 2021 Outlook.
I plan to release it soon, but I want you to know that I’ve been doing diligent research over the last month to identify a few budding trends that I believe have gone ignored.
Let’s dive into some of those trends today, and take a look at the Watch List.
This morning, the Dow is off 135 points after Senate Majority Leader Mitch McConnell refused to endorse a new bipartisan stimulus package. With delays looming again for a Grand Bargain, the focus has shifted back to the rising number of coronavirus cases.
Around the globe, Bloomberg reports 517,473 new cases on Monday.
In the United States, the nation reported a staggering 192,299 new cases, according to Johns Hopkins University.
Travel stocks are slumping after nations announced stricter social distancing guidelines. In addition, Britain’s continued failure to strike a new trade deal with the European Union has weighed on sentiment.
This morning, I’ll be watching President Trump’s vaccine summit at the White House for clues into the timing of the rollout. There are a few key earnings results that I’m eyeing as well, given their role in my Family Portfolio.
My 2021 Outlook
I’ve held back no punches when it comes to the state of the financial markets. Since 2010, the Federal Reserve has been the center of the Universe. In fact, the Fed was largely responsible for almost every uptick in the market over the last decade.
But most of that money-supply expansion and open market operations were borne out of the last crisis. This new crisis will require a shift from monetary policy action to fiscal policy action.
What I mean by this is that the next recovery will be driven largely by Congress and the U.S. Treasury Department. If Congress is unable to get money into the hands of small business owners – or they simply take too long to do it – we’re going to see prolonged weakness in the economy.
That doesn’t mean that the market will tank. Hell, we’re already in the middle of a K-shaped recovery… and the Dow and S&P 500 are at all-time highs. I think that with Janet Yellen coming back into focus, she will be the greater force in Washington. I expect that the U.S. Treasury Department – with record liquidity at its own disposal – will be the focus of the markets.
Look for the agency to get creative with new loans, grants, and other programs designed to stimulate the economy at all costs.
With that in mind, the other major trend factor in the market is human behavior. A lot of people have been waiting for life to “get back to normal” in the spring or summer of 2021.
But what exactly does this mean?
Attending live sports events?
Going to movies?
Returning to malls?
Interacting… the same amount on their phone as they had in the past?
The point I’m making here is that consumer behavior changed dramatically due to the virus.
Supply chains tightened.
Americans relied more on e-commerce and delivery. We saw a massive uptick in streaming services and videoconferencing. Fewer people are traveling by plane and spending more time outdoors. I don’t really see any scenario where “convenience” and “efficiency” take a back seat.
So, many of the so-called “Value Stocks” in certain airlines and movie chains look like “Value Traps.” And some of the tech stocks that have pulled back on vaccine optimism… look like bargains.
I will discuss a number of other trends that I project will happen in the year ahead.
This includes a focus on international threats, the ongoing push for EV and climate policy, and a few hidden sectors that I think remain great buys heading into 2020.
Look for more in the coming weeks.
MY STOCK WATCH LIST
GME: GameStop will report earnings today. This has been a stock that I’ve wanted to own for some time. I’ve been very bullish on its rebound in recent weeks, and it has a very specific entry point for my Family Portfolio. Given the short float and a very optimistic time for the gaming industry, I remain optimistic.
REX: The retailer of ethanol, natural gas, and distiller grains has rallied since March nearly 200%. But the stock saw a significant charge over the last week. Rex American Resources isn’t covered well by Wall Street. Hedge fund activity has dipped. ROE is weak over the last 12 months. But most importantly, the company’s CFO just sold $260,000 in company stock. Watch this stock to see how it performs over the next two weeks. Based on the shift in insider selling, I project it will decline – given the importance of that indicator.
Other stocks to watch: ROKU, JD, HWM, LYV, MDB, BYND, WWE