Barron’s Weekend Summary: A panel of market experts says the S&P 500 could gain almost 10 percent in 2021
* Cover story: Barron’s surveyed 10 market strategists and chief investment officers at large banks and money-management firms on the outlook for 2021 and averaged their year-end S&P 500 forecasts, which range from 3800 to 4400—the group expects the index to rise by roughly nine percent next year, to about 4040, and says the US economy should grow by five percent in 2021, its fastest rate since 1984.
* Tech Trader: The tech industry had a strong run in 2020, but next year will be a different story, says columnist Eric Savitz, who offers a number of predictions: The IPO market will be bigger; cloud company valuations will contract for their highs; reopening the economy will help a range of companies, including INTU, YELP, GRPN, BKNG, EXPE, ABNB, and LYFT, while UBER may be weighed down by its food delivery unit; low interest rates and a huge pool of capital will mean more dealmaking; and among big tech, MSFT and AMZN may be the safest bets.
* Trader: Christopher Harvey, US equity strategist at Wells Fargo Securities, suggests buying stocks with high “Covid beta,” those most sensitive to the market’s rise and fall based on good or bad coronavirus news—such as DRI, MGM, and WHR—because they will benefit the most when life returns to normal.
* Interview: Barry Ritholtz and Josh Brown of Ritholtz Wealth Management talk about what they’re doing with their money, what others are doing with their money, and the charms of direct indexing; “Academic research shows it’s much, much harder to be a successful stockpicker, a market timer, or trader than it appears, and you’re better off owning the globe and trying not to get in your own way,” says Ritholtz.
* Profile: Christopher Lees, co-manager of the JOHCM Global Equity fund, says that real estate investors know to “beware good houses in bad neighborhoods,” an idea that also holds for equity markets, where neighborhoods are influenced not by school quality nor commute times, but by market cycles, macroeconomics, and secular trends.
* Features: 1) Positive on Comcast: The media giant seems to be getting crushed by DIS and NFLX, as well as cable rival CHTR, and the stock trails peers, yet shares could pick up steam “as investors come to realize that Comcast’s diverse portfolio—including broadband, film studios, streaming, and theme parks—is well suited to a post-Covid-19 world”; 2) Barron’s picked its top 10 stocks for 2021, a list that has a value bent and includes two returning companies, Berkshire Hathaway and GOOGL; the eight new ones are AAPL, ETN, GS, GHC, KO, MSGE, MRK, and NEM; 3) For investors who want to buy Bitcoin directly through a traditional brokerage account, the options are still limited—more importantly, there is no Bitcoin exchange-traded fund, and there may not be one for years, leaving US investor to buy the cryptocurrency on apps such as Robinhood, Coinbase, and SQ, though users must be watchful for fees.
* Follow-Up: 2021 could be a banner year for bank mergers if vaccines curb the pandemic, and both community and regional banks are apt to accelerate their deal making, heating up a trend that has been going on for decades; RF and CADE could fetch hefty premiums for banks seeking to grow in the Southeast, with PB and BXS possible buyers; With more than 13 million customers, Robinhood could be one of the top initial public offerings of 2021, valued at $20 billion or more, but the company will have to get past recent regulatory actions, expand its revenue sources, and help turn investors into savers.
* European Trader: “The European economy will continue to suffer from the effects of the coronavirus pandemic in the first half of 2021. And while Brexit will mostly hurt the UK, it will have an economic cost for Europe broadly, even if the country signs a trade deal with the European Union before December 31.”
* Emerging Markets: China, South Korea, and Taiwan, which account for two-thirds of the global equities index, flipped the script on developing markets in 2020, quelling the Covid-19 pandemic, while the West struggled—BABA, TSM, Tencent, and Samsung Electronics, the four biggest companies in the emerging markets index, are “world-class pathbreakers.”
* Commodities: Oil futures are on track to end the year significantly lower, as the pandemic’s economic restrictions reduced energy demand—West Texas Intermediate crude is down nearly 22 percent year to date, while Brent crude oil is set to lose almost 23 percent this year for its biggest yearly loss since 2015.
* Streetwise: Answering the question of whether DKNG and SQ shares will shine again in 2021, says columnist Jack Hough, requires predicting when the pandemic will shift, whether policymakers will help or hurt demand for stocks, and whether investors will favor growth or value a year from now—an essentially impossible task.