[PREDICTION] The Boom of 2021
If you read the news, you may think the world is on the brink of collapse.
COVID cases are still high. In some countries, like Portugal, COVID is spreading at a record rate.
And there is a new variant of the virus originating in Brazil. Like the strains discovered in the UK and South Africa, it’s more contagious than the “original” variant.
It’s all bad news, right?
We are in the final stage of this fight. Within months, the world will come back to a new normal. And it will be better than what we had in 2019.
The World Can’t Wait to Spend and Travel
The first bit of good news came from China. Despite the fact that COVID originated there and caused massive lockdowns, the country’s economy kept growing in 2020.
In the US and other countries where vaccination started, we’ll see fewer restrictions as soon as Q2. This will help businesses and move the economy forward.
In other words, this summer, you will likely be able to go to your favorite restaurant and find almost everything as it had been before COVID.
This is a great situation for the so-called “cyclical” sectors. These are the sectors that grow together with the economy. Think about companies that produce commodities. As economies recover, they need more commodities to manufacture goods to sell.
Another example of a “cyclical” sector is consumer discretionary. In simple terms, it’s the stuff you don’t “need” to buy but rather want it because it’s nice to have. Think entertainment and travel, for example.
The Global Recovery Will Keep Lifting Stock Prices
Global governments will spend trillions of US dollars this year propping up their economies.
In the US, the Fed will also keep interest rates low. It is another way of stimulating the economy.
And with interest rates at record lows, the government will borrow money and put it into the economy.
Some will trickle down to consumers, and some will go into large projects. But the effect of this historically high spending will be high economic growth.
And since the extent of the stimulus is unprecedented, it’s hard to say how fast the economy will grow.
But you can bet that will be better than a lot of people expect.
The Biden administration and the Fed will keep stimulating until inflation is out of control. Which won’t be likely this year.
But as long as the stimulus programs are in place, the stock market will be happy.
How to Play It
To profit from what looks like the biggest economic recovery in history, get exposure to stocks and sectors that do well in a recovery. Airlines, retail, and entertainment — all of these look attractive.
To get exposure to airlines, take a look at the U.S. Global Jets ETF (JETS). For retail sector exposure, check out SPDR S&P Retail ETF (XRT). Finally, Invesco Dynamic Leisure and Entertainment ETF (PEJ) is a good way to invest in the entertainment sector.
In other words, prepare to be surprised this year, and in a good way.
After a nightmarish 2020, the outlook for this year is as bright as they come.
Thank You For Your Loyal Readership.
The Financial Star Team.