Risks in 2021
- Rate of vaccine deployment and reducing COVID19 cases / variants
- Rate of economy recovery from COVID19
- Extreme weather shifts due to global climate risks
- Inflation and government debt
- Asset bubble (both real estate from low interest rates, and equities from the influx of retail investors)
Technical Analysis of S&P500
- Price target between $3,500 to $4,100
- Technically speaking, there is more downside than upside in the current market; but high degree of uncertainty due to the increase in stimulus driving up the PE of the market
- Since March 2020, Nasdaq 100 has outpaced the S&P500 by 13%
- Tech is leading the charge, mainly due to technological advancements forced upon by COVID19 (shift to e-commerce and digital environment)
- If correction was to come in the short-term, my prediction is that tech would be hit the hardest, but in the long-run, there will be a rotation from the slow, mature, “old world” to the tech new order
The Macro Outlook
- Unemployement continues to decrease and there’s a huge spike in building permits which signals a signifcant recovery since March 2020
- Historically, there were only 3 main events which drove a significant spike in unemployement: dot com bubble 00s, housing bubble 09s, and covid in 20s.
- If history were to repeat itself, will be another bull market for another decade
- Price of S&P500 is outpacing the growth in GDP, but not by much. Will need to continue to watch this divergence that may signal a short correction
The Corporate Outlook
- S&P500 is outpatching both the growth in corporate profits and personal consumption expenditures. Similiar to S&P500 vs GDP, as this divergence continues, look for a correction
- Capacity utilization is increasing and is signalling a strong recovery. Will continue to watch until it hits the previous peaks of 78
