Themes for 2021
What top trends will E*Trade be watching in 2021? As the markets crank ahead into the new year, there are five developments investment managers at the firm are using as overlays in their analysis, he said.
Vaccine distribution: With stockpiles of vaccinations sitting unadministered in the U.S., it remains to be seen how the nation will handle the logistics of mass vaccinations, Loewengart said. “If distribution goes according to plan, by the second half of the year, a meaningful portion of the general population could be vaccinated. But the timeline isn’t set in stone, and any major disruptions to distribution or manufacturing channels may delay a full economic recovery,” he added.
Stimulus rebounds and ramifications: The latest $900 billion aid package passed by Congress included another round of direct payments, supplemental unemployment benefits, and small business loans. But the question remains—will it be enough, Loewengart said.
Investment managers and advisors should be mindful that there may be after effects of a stimulus package of this size and scope, which could impact the market. In addition to the fiscal relief, “the Federal Reserve has unleashed nearly every tool at its disposal to help prop up the economy. The growing federal debts and deficits and increased money supply may spur inflation and contribute to a decline in the value of the dollar against other major currencies,” he said.
Market trajectory: It is undeniable, as Loewengart says, that the market has seemingly latched on to a future “that is far removed from current conditions, looking beyond a rampant virus and crippled economy, pricing in optimism for the year ahead.” But can the market continue to roar? “It may take new catalysts for stocks to rise further,” he predicted.
Will small cap and value have their year in the sun? As investors begin to move past the coronavirus, there may be opportunities for new market leadership. While growth stocks have outpaced value stocks by a wide margin in recent years, “small caps and value strategies may be poised to rebound as the economy recovers. Investors may want to focus on the fundamentals of individual companies and sectors for results,” Loewengart said. It will also pay to understand that some effects of the pandemic won’t be going anywhere. For example, individuals’ and companies’ increased reliance on technology and digital infrastructure is unlikely to diminish in the year ahead or frankly, any time soon, he said.
Global growth: Loewengart said the expected change in U.S. leadership may play out globally in surprising ways. For instance, he notes that Morgan Stanley analysts expect global economies to recover more quickly than US equities and with attractive prices relative to their US peers, so international stocks may take the spotlight, he said.