Post by Admin/YBB on Dec 21, 2020 21:02:46 GMT -6
[Italics within the brackets are my additions/elaborations]
Pg M1, Trader: Big surprise of 2021 will be booming economy and so-so stock market – just the opposite of 2020 that has poor economy and good stock market. Post-pandemic recovery should be strong with 4.0-6.5% GDP growth. The Fed will remain accommodative until 2023. Inflation may be 2.5-3.5% [and we will see how the new avg 2% inflation target will work]. Household and corporate liquidity will be run down. Strong earnings growth with inflation will bring down the P/Es. Cheaper cyclicals will do better than expensive growth. 28% weighting of techs in SP500 will be a drag.
Dogs of the Dow
2021 List: CVX, IBM, DOW, WBA, VZ, MMM, CSCO, MRK, KO, JPM
The list is quite diversified.
2020 List: DOW, XOM, IBM, CVX, PFE, MMM, WBA, CSCO, KO, VZ
Changes are that MRK and JPM [in 2021] have replaced PFE and XOM [from 2020].
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
ZIRP [0-0.25% fed fund rate] through September 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +0.44%, SP500 +1.25%, Nasdaq Comp +3.05%, Russell 2000 +3.05%. DJ Transports -0.84%; DJ Utilities +0.25%. [TSLA +13.94%]. US$ index (spot) -1.14%, oil/WTI futures +5.43%, gold futures +2.50%.
YTD [index changes only], DJIA +5.75%, SP500 +14.81%, Nasdaq Comp +42.16%. [TSLA +730.64%]
Pg M4, Europe: European Covid-19 recovery may be weak [long and shallow]. Brexit will hurt although the UK will be hurt the most. Monetary and fiscal stimulus will continue. OECD has published 2 scenarios: Optimistic assumes successful vaccine(s) and better trade relations; Pessimistic assumes problems with effectiveness and/or distribution of vaccines. 2021/H1 may be difficult but 2021/H2 should be better. Attractive cyclicals include retailers, restaurants, bars, cinemas, etc.
Pg M4, Emerging Markets: EM growth stocks are attractive post-pandemic. Many EMs are in later stages of Covid-19 recovery. Improving global trade relations and falling dollar should also be positive. However, some of the good news is already priced in; note the outperformance of MCHI, EMQQ, etc. S Korean and Chinese [consumer] stocks are still attractive.
Pg M6, Commodities: Covid-19 vaccinations should boost oil prices in 2021 H2. Oil was hit severely by pandemic and OPEC/OPEC+ infighting that led to oil crash in 2020/Q2, but that is now behind us. Recent OPEC/OPEC+ actions have been constructive.
Pg M5, Options: 2020 was a record year for options and 2021 may be another record year. People stuck at homes and phone app traders joined institutional investors to trade options. Higher demand may make options more expensive.
[SP500 VIX 21.57, SKEW 147.02 ] [Yahoo Finance data]
Pg M23, M28: A good week in Europe [Germany +4.05%, Spain -0.44%] and an up week in Asia [Indonesia +3.26%, Malaysia -1.78%]. The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -6% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.08%, 2-yr 0.13%, 5-yr 0.39%, 10-yr 0.95%, 30-yr 1.70% [Treasury data*]. Dollar fell, DXY 89.92, -1% [M31]. Gold [Handy & Harman spot, Thursday] rose to $1,880, +2%; the gold-miners rose [M34]. [^XAU was at 144.90, +4.54% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M29].
*For local rates www.depositaccounts.com/banks/rates-map/
Bonus from Part 2. Due to post length limitation (approx. 1,260 words or 6,760 characters), these won’t be repeated in Part 2.
Pg 24: Cover Story, “2021 Outlook: The SP500 Could Gain Another 10% Next Year”. 2021 will be a recovery year from Covid-19. The leadership will change from growth to cyclicals. Concerns about government deficits and spending, and inflation may not be until 2022.
2021 Yearend Projections from 10 Strategists
SP500 3,800-4,400 [avg 4,040]
SP500 EPS $165-178 [avg $170]
10-yr Yield 1.00-1.48% [avg 1.42%]
Fed Funds 0.00-0.25% [as now]
Gold $1,400-2,300 [avg $1,881]
GDP Growth +5%
Inflation All over the place
Fed QE Some tapering in 2021/H2
Mentioned are FR/BL PRFRX, BKLN; HY ANGL; EM local-currency EMLC, EBND; dividend-stocks.
Pg 7, Up and Down Wall Street: Dual record highs – for the stock market and for Covid-19 cases and deaths. Much of 2021 returns may have been pulled forward by this market. Institutional cash is the lowest since 2013. Staying invested with appropriate allocations should work but moderate expectations. Reopening trades with cyclicals may be more profitable than crowded tech and work-from-home [WFH] trades. Shorting dollar to buy Bitcoins may be stretched already. Individual trading in stocks and options has increased significantly and that may be from Dunning-Kruger Effect that says people are overconfident but are not aware of this. Zero-commission trading with apps adds fun factor for people at home.
The Fed promised to continue easy money policies and indicated that it is not concerned yet with high stock P/Es. Fed policies are more favorable to borrowers. With $18 trillion in bonds globally at negative yields, investors are forced to take more risks. Consider replacing stocks with long-term calls; pair with selling puts to reduce costs. Other ideas include mREITs [MORT, etc], muni CEFs and gold [for hedging]. Risks: Big techs haven’t discounted regulatory risks they face in the US, EU and China; high institutional consensus on US and EM equities that leaves little room for errors; new Covid-19 strains emerging; serious side effects of Covid-19 vaccines; high refusal rates for vaccinations [current indications 34%].
Pg 11, Streetwise: Stocks with big growth dreams/potential in 2021 are online gaming and gambling DraftKings/DKNG and payment aggregator and processor Square/SQ.
More later….
Pg M1, Trader: Big surprise of 2021 will be booming economy and so-so stock market – just the opposite of 2020 that has poor economy and good stock market. Post-pandemic recovery should be strong with 4.0-6.5% GDP growth. The Fed will remain accommodative until 2023. Inflation may be 2.5-3.5% [and we will see how the new avg 2% inflation target will work]. Household and corporate liquidity will be run down. Strong earnings growth with inflation will bring down the P/Es. Cheaper cyclicals will do better than expensive growth. 28% weighting of techs in SP500 will be a drag.
Dogs of the Dow
2021 List: CVX, IBM, DOW, WBA, VZ, MMM, CSCO, MRK, KO, JPM
The list is quite diversified.
2020 List: DOW, XOM, IBM, CVX, PFE, MMM, WBA, CSCO, KO, VZ
Changes are that MRK and JPM [in 2021] have replaced PFE and XOM [from 2020].
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
ZIRP [0-0.25% fed fund rate] through September 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA +0.44%, SP500 +1.25%, Nasdaq Comp +3.05%, Russell 2000 +3.05%. DJ Transports -0.84%; DJ Utilities +0.25%. [TSLA +13.94%]. US$ index (spot) -1.14%, oil/WTI futures +5.43%, gold futures +2.50%.
YTD [index changes only], DJIA +5.75%, SP500 +14.81%, Nasdaq Comp +42.16%. [TSLA +730.64%]
Pg M4, Europe: European Covid-19 recovery may be weak [long and shallow]. Brexit will hurt although the UK will be hurt the most. Monetary and fiscal stimulus will continue. OECD has published 2 scenarios: Optimistic assumes successful vaccine(s) and better trade relations; Pessimistic assumes problems with effectiveness and/or distribution of vaccines. 2021/H1 may be difficult but 2021/H2 should be better. Attractive cyclicals include retailers, restaurants, bars, cinemas, etc.
Pg M4, Emerging Markets: EM growth stocks are attractive post-pandemic. Many EMs are in later stages of Covid-19 recovery. Improving global trade relations and falling dollar should also be positive. However, some of the good news is already priced in; note the outperformance of MCHI, EMQQ, etc. S Korean and Chinese [consumer] stocks are still attractive.
Pg M6, Commodities: Covid-19 vaccinations should boost oil prices in 2021 H2. Oil was hit severely by pandemic and OPEC/OPEC+ infighting that led to oil crash in 2020/Q2, but that is now behind us. Recent OPEC/OPEC+ actions have been constructive.
Pg M5, Options: 2020 was a record year for options and 2021 may be another record year. People stuck at homes and phone app traders joined institutional investors to trade options. Higher demand may make options more expensive.
[SP500 VIX 21.57, SKEW 147.02 ] [Yahoo Finance data]
Pg M23, M28: A good week in Europe [Germany +4.05%, Spain -0.44%] and an up week in Asia [Indonesia +3.26%, Malaysia -1.78%]. The equity CEF index [data to Thursday] outperformed the DJIA and its discount was -6% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.08%, 2-yr 0.13%, 5-yr 0.39%, 10-yr 0.95%, 30-yr 1.70% [Treasury data*]. Dollar fell, DXY 89.92, -1% [M31]. Gold [Handy & Harman spot, Thursday] rose to $1,880, +2%; the gold-miners rose [M34]. [^XAU was at 144.90, +4.54% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M29].
*For local rates www.depositaccounts.com/banks/rates-map/
Bonus from Part 2. Due to post length limitation (approx. 1,260 words or 6,760 characters), these won’t be repeated in Part 2.
Pg 24: Cover Story, “2021 Outlook: The SP500 Could Gain Another 10% Next Year”. 2021 will be a recovery year from Covid-19. The leadership will change from growth to cyclicals. Concerns about government deficits and spending, and inflation may not be until 2022.
2021 Yearend Projections from 10 Strategists
SP500 3,800-4,400 [avg 4,040]
SP500 EPS $165-178 [avg $170]
10-yr Yield 1.00-1.48% [avg 1.42%]
Fed Funds 0.00-0.25% [as now]
Gold $1,400-2,300 [avg $1,881]
GDP Growth +5%
Inflation All over the place
Fed QE Some tapering in 2021/H2
Mentioned are FR/BL PRFRX, BKLN; HY ANGL; EM local-currency EMLC, EBND; dividend-stocks.
Pg 7, Up and Down Wall Street: Dual record highs – for the stock market and for Covid-19 cases and deaths. Much of 2021 returns may have been pulled forward by this market. Institutional cash is the lowest since 2013. Staying invested with appropriate allocations should work but moderate expectations. Reopening trades with cyclicals may be more profitable than crowded tech and work-from-home [WFH] trades. Shorting dollar to buy Bitcoins may be stretched already. Individual trading in stocks and options has increased significantly and that may be from Dunning-Kruger Effect that says people are overconfident but are not aware of this. Zero-commission trading with apps adds fun factor for people at home.
The Fed promised to continue easy money policies and indicated that it is not concerned yet with high stock P/Es. Fed policies are more favorable to borrowers. With $18 trillion in bonds globally at negative yields, investors are forced to take more risks. Consider replacing stocks with long-term calls; pair with selling puts to reduce costs. Other ideas include mREITs [MORT, etc], muni CEFs and gold [for hedging]. Risks: Big techs haven’t discounted regulatory risks they face in the US, EU and China; high institutional consensus on US and EM equities that leaves little room for errors; new Covid-19 strains emerging; serious side effects of Covid-19 vaccines; high refusal rates for vaccinations [current indications 34%].
Pg 11, Streetwise: Stocks with big growth dreams/potential in 2021 are online gaming and gambling DraftKings/DKNG and payment aggregator and processor Square/SQ.
More later….