You may had your concerns about 2021 for various reasons, but it shouldn’t have anything to do with your equity investments.
This was the third year in a row for the various indexes and averages to end the year higher. For example, the Standard & Poor’s 500 stock-index climbed over 25% last year.
That is substantially stronger than usual.
The big question now is what is the New Year going to bring?
I thought that 2021 had to be a good year as the Federal Reserve supported equity investing with essentially zero interest rates.
Money sought a higher return and a great deal of that money moved into the stock market.
I will be the first to admit again that I thought there would be a correction late in the year as price-to-earnings ratios had gotten so high and the bull market was getting long in the tooth.
I was completely overlooking the fact that there was just no other place to put your money except stocks.
You just could not ignore that people were getting tired of not getting anything back on their savings.
It was one thing when there was
no inflation, but quite the other when inflation climbed.
That leaves us with what will happen this year?
It is hard to see the markets strength subsiding.
Some would point to the coming rate hikes by the Fed, but they have a long way to go to even get to 1 - much less 2%.
I don’t see a recession on the horizon and I would expect earnings reports to be positive.
It is hard to fight higher earnings reports.
With that all in mind, what will a person do?
It would go without saying that the FANG stocks should still be favored.
It is hard to believe that a stock investor doesn’t already have a position in Amazon, Apple, Google, Facebook and Netflix.
If you own those, then you surely own Nvidia and Marvel.
With all the money flowing for vaccines one probably has invested in Pfizer or Moderna.
I was interested by the picks in Barrons for the New Year. They ran out some old names such as Johnson & Johnson, IBM, GM, AT&T and Royal Dutch Shell.
I think their point was that each of these provide a sizeable dividend and are trading a much lower multiple.
I would say that is value investing in any other language.
My thought on the above mentioned value stocks is whether the management is up to the task.
One can look back at what the management did with Microsoft. Each of the value stocks actually makes something and has the potential to increase market share. It might be a hedge against a possible correction later in the year.
I tend to be one who is patient and waits to buy when everyone else is running for the door.
That is real value but also quite scary.
Each to their own, but it just seems that his bull has not run out of gas yet.