Barron's Weekend Summary: Despite the recent political mayhem, the economy is gearing up for post-pandemic recovery
* Cover story: Despite the “historic mayhem in the nation’s capital, stocks are rallying on the trillions of dollars in stimulus that may only be accelerated under the new administration, a chaotic political season is winding down, while the economy is gearing up for a post-pandemic reopening”; Domestic policy, trade relations, and additional efforts to revive the economy should more predictable under the Biden administration—and now might not be a good time to own anything defensive.
* Tech Trader: +/- FB, TWTR: Social media companies, which were already facing calls for greater regulation, are now taking heat for their role in creating the tense political climate that led to a mob taking over the US Capitol, and the risks to their operations and to their shareholders are rising.
* Trader: “Whatever is propelling the market higher, it’s starting to get worrisome. BAC’s Bull & Bear indicator hit 7.1 this past week, up from 6.7 in mid-December, and is getting ever closer to where the indicator starts to signal extreme bullishness.”
* Interview: Carmen Reinhart, chief economist of the World Bank, says there are limits to what central banks can do help the economy, and that all of the easy money in the world can’t lead us to prosperity, notwithstanding the stock market’s belief to the contrary.
* Profile: Nancy Zevenbergen, founder of Seattle-based Zevenbergen Capital Investments—which runs three mutual funds, all of which rank in the top one to two percent of large growth funds—talks about founder-led firms, the lack of women leaders at technology companies, and what she’s excited about now.
* Features: 1) Target-date funds are about to undergo a major facelift—these asset-allocation funds in 401(k) plans, with end dates that match a person’s expected retirement, will soon add more unusual investments, such as annuities and perhaps even private equity, to their stock/bond portfolio mix; 2) Positive on WMT: Socially conscious consumers and investors have long criticized the retailer for its massive carbon footprint, its sale of assault-style rifles, and its low hourly minimum wage, but the company is increasingly adopting socially responsible policies and trying to create positive change for all stakeholders; 3) Cautious on GME: The company is in a problematic position now that almost all videogames are available for download, and the thrill of being an early adopter has gone virtual—analysts see earnings, which have declined for four consecutive years, going deeply negative in the 2021 fiscal year that ends this month, and any rebound later this year is likely to be fleeting.
* Mutual Funds Quarterly: 1) “The broad indexes, so often touted as diversified, really aren’t—not anymore. That’s because the market itself isn’t truly diversified. That sets investors up with a conundrum: What does it mean to own a diversified portfolio if the S&P 500 itself is at its most concentrated in decades? And the bigger question: Is diversification still important?” 2) As of December 31, 2020, the average return of a vintage 2020 target-date fund was 10.8 percent, one percentage point lower than the 11.7 percent return for a balanced fund with a 50–70 percent equity allocation, according to Morningstar Direct—“For investors in these set-it-and-forget-it products, 2020’s performance offers reason for comfort.”
* European Trader: The Brexit trade deal between the UK and the European Union has boosted hopes that 2021 will be a good one for equity investors in British companies—the accord means firms have avoided some additional tariffs and the potential for significant border delays when importing and exporting goods.
* Emerging Markets: Bitcoin mining has long been dominated by China, where entrepreneurs embraced the cryptocurrency’s ecosystem early on, while Westerns remained wary—but regulatory and other problems in the country have opened a window for non-Chinese miners, and a near-quadrupling of Bitcoin prices since October promises fatter profits.
* Commodities: “Palladium tallied a fifth straight year of gains in 2020—and the rally shows no signs of letting up. Greater restrictions on air pollution and a likely rise in travel is expected to boost demand for the metal, which is used in automotive parts.”
* Streetwise: Leland Miller, chief executive of China Beige Book, says China’s official story about rebounding from an economic downturn is accurate, but the recovery isn’t especially strong, and is driven too much by increased production and not enough by private household demand.