Market Health

Checking In on Our 2021 Forecasts

A wise man once said…

Woooah, we’re halfway there.

Now that we’ve closed the book on the first half of the year, it’s time to revisit Chief Trends Strategist Matthew Carr’s and Engineering Strategist David Fessler’s annual predictions.

They each made five bold claims in January… back when the infamous “2020” could still be seen in the rearview, the COVID-19 vaccines were brand-new, and 2021 was full of promise and potential.

So let’s take a look and see how these predictions have fared in the ever-changing, unpredictable landscape of 2021.

Matthew Carr

  1. Cannabis Grows Like a Weed: In 2021, I think we will see the inklings of major changes at the federal level – like the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, Secure and Fair Enforcement (SAFE) Banking Act, or Strengthening the Tenth Amendment Through Entrusting States (STATES) Act passing. And I think as many as five more states will legalize cannabis markets this year! I’m watching Connecticut, New Mexico, New York, Pennsylvania, Rhode Island and Virginia.

Sure enough, four of the six states Matthew mentioned have already legalized cannabis markets so far this year. New York’s legalization laws took effect in March. And last week, legalization laws took effect in Connecticut, New Mexico and Virginia.

With these new laws in place, an estimated 145 million Americans now live in a jurisdiction where cannabis is legal statewide. This state-by-state momentum is adding fuel to the case for federal legalization.

Not to mention that the king of American e-commerce, Amazon (Nasdaq: AMZN), publicly stated in June that it will actively support efforts for federal legalization and stop testing its employees for cannabis.

  1. Travel and Leisure Stocks Recover: 2020 was a devastating year for airline, cruise ship, restaurant, movie theater, theme park and travel stocks. As I’ve already covered in this issue, bankruptcies abounded in these sectors. But in my opinion, these are must-haves for 2021. There is pent-up consumer demand for travel… and being anywhere besides home.

Travel. Is. Back.

Matthew’s airline stocks to watch for 2021 are all up between 10% and 35% so far this year. And the leisure and entertainment stocks are up between 15% and 25%… with one exception.

On December 8, 2020, Matthew said of AMC Entertainment Holdings (NYSE: AMC), “I don’t think this is the final nail in the [coffin]… We can’t call time of death yet.”

Boy was that fortuitous! The meme stock is up 2,350% year to date.
AMC Entertainment Holdings Performance

  1. The Energy Bull Is Back… for Now: In 2021, expect U.S. crude to retake $60 per barrel – a level not seen since the early days of 2020. Pre-pandemic consumption won’t return this year. But I think we’ll have a multiyear rally – albeit a bumpy one – in energy. This sector was the worst performer in 2020 by a considerable margin. Time to go discount shopping!

As I write this, the price of West Texas Intermediate crude is $73.43, just as Matthew predicted. Oil use has rebounded as normal activities have resumed and businesses have reopened. This economy has also been a boon for Big Oil names, like Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP).

  1. The Stock Market Rally Continues: It’s a new year, and there’s a new leader at the helm of the U.S. The first year in the modern U.S. presidential cycle that I created is one of the best years for stocks. We’ve enjoyed double-digit gains on the Dow [Jones Industrial Average] in the first year of six of the last eight presidential cycles. However, we did see two losses in 2001 and 2005. Those are important to note because of the similar economic backdrops. But I think we’ll see another year of gains for U.S. stocks, with small caps leading the charge.

The broader indexes are on a roll and sporting gains between 13% and 15% year to date. The Dow is on track to deliver a double-digit gain in this first year of the presidential cycle.

The weighted Russell 2000 small cap index is still neck and neck with the S&P 500 Index. So we’ll have to wait and see which index emerges victorious.

  1. Bitcoin Tops $30,000: The reward halving that happens every four years triggers a multiyear bull market. In last year’s forecast issue, I predicted Bitcoin would have an explosive 2020. Since then, the cryptocurrency has more than doubled and set new all-time highs. But there’s still room for this bull to run. I think $30,000 is a feasible target, with potentially a lot more in store. (Writer’s Note: I made this prediction when Bitcoin’s price was at $20,000. Since the new year began, Bitcoin’s price has already surpassed $30,000, so my estimate was far too conservative!)

This prediction came true about 364 days early when it crossed the $30,000 mark on January 2. But, as Matthew admitted, his estimate was far too conservative.

Four months later, Bitcoin said, “Tag, you’re it!” to $65,000 before retreating to that $30,000 level.

So I guess Matthew was more on the nose than we originally thought…

David Fessler

  1. Economic Uptick: Starting in the second quarter, I expect to see markets anticipate the beginning of America’s reopening and its subsequent economic improvement. By the end of the second quarter, every American who wants to be vaccinated should have had that opportunity. Matthew and I agree that this will be a boon for travel and leisure stocks!

I’ll admit, I thought this one was a stretch at first. I was not convinced that between January and July a vaccine would be approved, administered and available to the general public.

Thankfully, I was wrong… and Dave was 100% correct.

Approximately 67% of American adults have been vaccinated against COVID-19. This has undoubtedly helped boost the economy and encouraged people to resume normal summertime activities.

  1. New Technology: 2021 will see plenty of new technologies gain further traction. Some areas I’m watching are business automation and robotics, artificial intelligence (AI), new computer architectures, next-generation communications, and advances in cybersecurity. Businesses will use these technologies to increase efficiency and resilience. They will be integral to expanding operations in a cost-effective manner.

Cybersecurity companies are flourishing this year, thanks in part to the continual cyberattacks on businesses and governments. These companies are also being called in to create resilient and hack-proof platforms in anticipation of attacks.

Business automation and robotics companies are also increasingly utilizing AI. These are still all great areas to invest in.

  1. Green Hydrogen: It’s become clear that green hydrogen is one of the elements key to a carbon-free future. This is one of the fastest-growing areas in the energy sector. When green hydrogen is burned, it produces energy, heat and water vapor. There are no pollutants. It will be crucial to decarbonizing sectors of the economy that are difficult to electrify. Long-haul trucking, heavy manufacturing and aviation could all use green hydrogen to operate.

The story here remains intact. This pollution-free energy source is viewed as one of the key elements to reducing our carbon dioxide emissions.

It’s still Dave’s favorite investment in the renewable energy space.

  1. Energy Storage: Energy storage was installed at record rates in 2020, and utilities are making large-scale investments in this sector. Paired with solar and wind resources, energy storage gives these electricity-generating sources baseload capability, eliminating the need for fossil fuel-based generating sources. I think we could see a fivefold or sixfold increase in the energy storage business by 2025. It’s a multibillion-dollar opportunity for investors.

Energy storage appears to be headed for another record year. In the first quarter of 2021, 910 megawatt-hours of energy storage came online. That was a 250% increase year over year!

Dave says his fivefold-to-sixfold increase for energy storage by 2025 is starting to look conservative.

  1. 5G and Satellite Internet: Faster internet for all will be the norm in 2021. It’s all about enhancing our connectivity to the rest of the world and each other. Whether it’s from a 5G fixed wireless access device or a Starlink satellite account, faster connections with lower latency open new doors in terms of what’s possible. And 5G brings the threat of obsolescence to fiber- and cable-based networks.

Unfortunately, the speed promise of 5G is not being matched by its rollout. It looks like the faster speeds that have been hyped by the major mobile carriers won’t reach most of the country until sometime next year.

There are several reasons for these delays. First, the availability of space in the radio spectrum that gives 5G a speed advantage is very limited. Second, the equipment needed to build out 5G infrastructure is being held up by supply chain imports.

There you have it…

Matthew and Dave successfully predicted upturns in 2021’s hottest sectors – everything from crypto and travel to cybersecurity and energy storage.

They may not have a crystal ball, but they do have a knack for identifying transformative trends.

And the profit opportunities that accompany these foresights are endless.

Good investing,

Rebecca

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