Here are some thoughts on what to expect in 2021, with help from BlackRock and other sources, states Jon Markman of Pivotal Point.
• Expect a robust, but uneven, rebound of earnings growth in Q1 and persistently low interest rates as the industrial restart accelerates and central banks tolerate inflation. This is a positive for industrial and consumer stocks but could leave shares of midstream money-center banks stalled and frustrated.
• Globalization will mean something new. Manufacturers appear ready to favor resilience over efficiency, which means they will make supply chains more stable by spreading them around the world rather than focusing on China. This helps force China to end its role as the world’s low-priced factory and become more of a consumption giant as defined by funds Global X MSCI China Consumer Staples (CHIS) and Global X China Consumer (CHIQ). It improves the fortunes of China wannabes like Vietnam (VNM), Indonesia (IDX), and Malaysia (EWM).
• The pandemic has turbocharged the great digital transformation, which is most easily seen in the exponential advance of e-commerce and home delivery over physical retail. Hello Amazon.com (AMZN) heading toward a $5 trillion market cap, and Etsy (ETSY); goodbye to Macy’s (M) and Kohls (KSS). This is not exactly a fresh insight, but you must realize there is much more to come. The automobile didn’t kill off horses, but the automobile biz is a zillion times bigger than anyone imagined in 1915.
• The pandemic and its lockdowns and quarantines have been great for misanthropes but most of us are social animals who crave physically close relationships and the community of crowds. I suspect smart entrepreneurs will refresh the shopping mall as an experience rather than just a place to scramble for last-minute holiday gifts.
• The pandemic will refocus attention on sustainability, which means more renewable energy, electric vehicles, and public transportation. Look for solar, wind, and hydro projects to regain steam and capture investors’ attention. The fund iShares Global Clean Energy (ICLN) is a good place to start.
• The pandemic, and its unequal spread and death rate, has forced a fresh look at racial, educational, and financial inequality. We need a unified approach to these divides that are tearing our country apart. Business leaders need to step out in front by recognizing that we can all grow wealthier together than separately. The ESG funds like iShares MSCI Global Impact (SDG) are a start.
Learn more about Jon Markman at Pivotal Point.