Stock Market Projections for 2021

Stock Market

Stock Market

This year hasn’t exactly played out according to plan for the stock market. It experienced an unprecedented fallout when coronavirus became a real threat during the first quarter. On the other hand, it also defied expectations by making a swift recovery amidst the chaos of the pandemic and its resulting recession. But as a forward looking market, investors and financial analysts are already making projections for how the stock market is likely to perform in 2021.

 

Key risks subsiding in 2021

Many agree that the outlook is considerably more positive given that the key risks that derailed the market are abating as we enter the new year. The main projection comes from investment banking firm JPMorgan Chase, whose chief US equity strategist, Dubravko Lakos, claims that the market is primed to surge in the coming year.

In an article on the stock market’s expected performance, Lakos outlines how the equity market has ‘one of the best setups for sustained gains in years’. He points to the outcome of the elections as well as the promising news on vaccine developments. Pfizer and Moderna are leading the way each with their vaccines showing more than 90% efficacy during their human clinical trials. These are expected to roll out in spring next year. S&P 500 is also expected to soar to 4,500 by the end of 2021, which is a growth of 26% from late November’s closing. The promise of a vaccine paves the way for more stability in the market as the world slowly returns to normal.

 

Tech stocks expected to correct as others make a comeback

A few sectors were hit hard with restrictions imposed within and outside the country. The list includes the oil, travel, leisure and hospitality industries that suffered from minimal travel allowed both in the US and the rest of the globe. However, news of the progress in vaccine developments already boosted airline shares in the US. United Airlines reported a 19% increase, while Delta Air Lines shares surged by 17% and Hawaiian Holdings rose by 50%. Vaccine developments have been nothing but promising news for these interconnected sectors.

Meanwhile, analysts predict that the market will see a correction particular for the tech sector. These include companies focused on online shopping, remote work software, streaming services, contactless payments, and even food deliveries. But these stocks could slump as the economy reopens and habits shift from the new normal back to the old normal. One way to profit off of this correction is to trade popular share CFDs instead of the underlying asset. Big tech companies like Facebook and Apple are among the most popular stocks of the year and they are worth more than they were before the pandemic. However, given the return to some old habits that might reduce our dependency on these technologies, they are expected to lose some of their value. Trading CFDs could be a strategy to profit off of this downtrend. Another recommendation for short-term and long-term investors is to put their capital into stocks that will benefit from economic stimulation. These include airlines, hospitality, and pharmaceuticals. Pfizer, for example, is already a huge buy on trading platforms.

 

Investors rewarding companies with R&D investments

Stock shares of companies investing heavily into future growth are also being rewarded by investors. This is according to Goldman Sachs who built a high-growth basket of companies poised to do very well next year. The basket contains pharmaceutical companies such as Incyte, chipmaker Advanced Micro Devices, and network security firm Juniper Networks. What they have in common is a high ratio of growth over the next few years, which comes as a result of their strong cash flow despite the financial turmoil.

That said, stock market projections have been wrong in the past due to miscalculations, sudden shift of events, and human bias among other factors. For investors, use these only as guidance instead of rules and keep a close watch on current events and stock market updates.