As we head into 2021, more than ever people want to tell you the future can't be predicted. That’s true about events and details. However, at a certain point the emerging mega trends and forces are relatively predictable and those are the ones you want to be involved in anyways. Here are some things to keep in mind throughout the new year.
Global Equity markets enter the year in a solid position. The clearest signal of that is the Global Dow index. Above 3300 looks great and this would have to lose 2800 to be problematic.
The S&P 500 Yield relative to the ten year US Treasury Yield continues to be supportive of stocks. Whether you agree with the rational or not, this is at a level that has preceded strong equity returns. Recent examples are the 2009 low, late 2012 and mid 2016.
If this is the mega bubble everyone keeps talking about, then emerging markets are likely to outperform the US. It already started via some measures in 2020 and could accelerate in 2021. Either way we’ll know pretty early in the year
Yes this includes US tech, which could be at least temporarily reversing a 13 year trend
The Shanghai Composite is trying to bust out to 5 year highs as the new year starts. If it starts heading higher there’s 25-30% upside. At least. And what happens if that area gets taken out?
If you’re not at least considering the possibility the 2020s are going to be huge for Latin America, you probably should. We could be a year or two out from a generational boom. Did you notice how similar this chart is to the Shanghai Composite? The most absurdly bullish scenario in the coming years is on the table.
Moving to some groups, there are many places where if the market does pull back, we’ll want to look for exposure.
The travel industry is the obvious trade of the year. Saying there is pent up demand is one thing. Seeing the travel industry break out out of a nearly 7 year base is another. The trade looks good although it may take some time.
Electrical Components are becoming more relevant and strategic over time. We want to buy pullbacks.
Speaking of strategic assets, rare earth metals could have just made secular cycle lows in 2020. The next clear resistance zone is the low-mid 80s
Disk Drives are starting to emerge out of a 20 year base. This is really interesting. If you have any thoughts I’d love to here them
Biotech is showing some weakness after an amazing run. The leading genomics stocks have gone parabolic and a few months of pulling back/consolidation may be upon us.
The Pharmaceutical Industry lagged the equity markets greatly in the middle of a pandemic. Clearly, they aren’t adding much value and in fact it appears they are detracting value. It appears their slow death will continue as central banks have (inadvertently or not) armed disruptors with all the capital they can handle.
Commodities as a whole haven’t looked this good in ages. The GSCI commodity index recently recovered the 1999 and 2016 lows.
Agriculture commodities caught fire in the back half of 2020 and ended up cracking a 6 year range. We want to buy pullbacks
The best trade in the group from this point may just be Coffee, but the trigger hasn’t come yet. You can see in the lower pane the momentum profile has changed, but the break of the decade long downtrend still hasn’t occurred. If it does, we’re going to want some exposure
Bitcoin’s breakout heard round the world could just head to 100K. The size of the base suggests 125K isn’t out of the question. It’s not going to happen overnight or in a straight line, but the action couldn’t be much better.
The US Dollar is approaching a long term pivot zone. The talk of the end of the dollar’s supremacy is all hype as long as this area holds. If it doesn’t…
Thanks for reading. Here’s to a healthy and prosperous 2021
(sorry it’s not 21 charts, they won’t let me send 21. Good title though amirite?)