Quam celerrime ad astra or abundans cautela non nocet
(‘Rapidly to the stars’ or ‘One can never be too careful’)
If Covid-19 defined the 2020 stock market, the virus's lingering effects probably temper the stock market forecast for 2021.
It may not go as well as many investors expect...
Most equity markets enter 2021 with favorable trends. Vaccines should start to control the spread of Covid-19, and S&P 500 earnings are expected to continue the rebound. The Federal Reserve has assured markets that it won't raise interest rates, and this seems to be in line with President Biden’s approach to fiscal stimulus.
However, as we saw last year, anything can happen, and in the most unexpected of ways, so rather than ramble on for pages about what may or may not be the state of investors portfolios by the end of the year, I am sharing two, essentially opposing views.
The Market Bear. An easy-to -read and easy-to-understand opinion by Jeremy Grantham, an old but thoughtful market bear and, incidentally, a big environmentalist (it’s hard not to like him).
His convictions have resulted in his firm (GMO) losing multiple tens of billions of assets as they are “value” managers and they have not performed at all well in the past 5 years. It shows that sticking to your convictions does not mean you can always be successful. It also does not mean he is not right.
Read Jeremy Grantham's article here
The Market Bull. A short piece from Capital Economics, a serious, independent economic research firm, which is currently very bullish on equities and predicts gains of 25-48% in major equity markets over the next two years.
Read the Capital Economics article here
The Strategic Expat. Although my personal view is to the positive, there is always room for some caution. These two articles really demonstrate that in any market situation, at any given time, there are some who call it exactly right, and many who don’t, so for all long-term investors, the best approach is invariably a sensibly balanced, risk-appropriate portfolio of assets.