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  • Writer's pictureJust Service Global

Investing in 2021

Exclusively for clients of Advisory firms in the Just Service Global network.

Source: Just Service Global

Are we in for a recovery boom? With vaccines being distributed (to those countries who can afford the cost) most commentators believe that the second quarter of this year will start to see more confidence in the markets and most importantly more confidence from investors that the world dodged a bullet. If history is any indication the 1918 Spanish Flu pandemic was followed by a bull market in the 1920s. Hence, it is possible we will see an extended bull run as a result of the pandemic recovery, along with continued support by government and central banks to boost economic activity (through printing more money and keeping interest rates low). Further to our comparison with the 1920s is that new technologies also helped the boom with examples like electricity, the automobile, the telephone, radio, consumer appliances et cetera. These technologies played major roles in stimulating growth which led to rising profits and equity prices-until it abruptly ended in 1929. The general view is the global economy will strengthen in 2021 as the pandemic winds down. Most commentators predict inflation will remain low for the next 2 to 3 years. As long as interest rates stay low there is no real inflation risk and is thus positive for investment markets. Our view on asset classes and themes for the year ahead: What is likely to outperform:

  • small to medium size listed companies are likely to outperform the big names having underperform in 2020.

  • financials (driven by bank automation) are likely to have a positive year

  • commodities: there is likely to be some recovery and demand for commodities (gold, silver, oil and metals in particular). Consumer confidence has recovered in China

  • crypto currencies and in particular Bitcoin likely to continue to trend positively due to limited supply (but very volatile)

  • technology sector should continue its positive run with biotech, clean energy ("sustainable") possibly outperforming. The mega tech companies such as Facebook, Apple, Amazon, Netflix and Google are likely to remain strong. Society will continue to communicate, work, shop and educate more remotely than ever before. Technology will continue to assist in this transformation. For example artificial intelligence, robotics, block chain and even 5G. The e-commerce sector represents the transition from traditional in person sales to online sales accelerating the transition from traditional brick and mortar shopping to online commerce

  • the energy sector in general was oversold and may see some recovery this year

  • emerging markets are likely to be reasonably strong with expected Chinese growth. China is in full throttle mode supporting the development of the country's new booming new energy market particularly in automobiles. Emerging markets to play catch up particularly Asia

  • China "new economy" sector is likely to have a strong year

  • Infrastructure and clean energy technology is expected to be in demand continuing demand 2021 along with health technology innovation

  • specific hedge fund strategies such as long short funds ( and are very important for hedging any portfolio)

  • ESG (Environment Social Governance) investing - sustainable energy is likely to go mainstream. Helped by the Biden win in the US there is major growth expected in the ESG orientated strategies

Despite the positive comments above all investors should be aware the market is high in comparison when looking at past Price-to-Earnings ratios. The Shiller price-to-earnings (P/E) ratio is a P/E ratio based on the average inflation-adjusted earnings from the previous 10 years. Over 150 years of history, the Shiller P/E ratio for the S&P 500 has an average of 16.8. Right now, the Shiller S&P ratio for the S&P 500 is 34.5 - double its historic average. And what is likely to underperform:

  • the US equity markets is likely to underperform other major markets

  • the US dollar is likely to weaken

  • fixed interest investments continue to not be attractive aside from inflation protected securities and funds holding short-term securities

For all enquiries email Regards The Just Service Client Service Team

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