A New Year Market Update
Hope you’re doing well these days and your friends and family are well. As we step into the new year, I thought I’d quickly share a few things I’m keeping an eye on from a market perspective.
Feel free to reach out if you want to discuss or catch up anytime.
1. Considering the Shift to a Joe Biden Presidency
After Election Day, the US equity markets experienced a sharp rally, coming on the heels of multiple vaccine announcements. Early chatter going into the new presidency has created buzz among several stock sectors:
• Infrastructure: Anticipation of a big infrastructure spending bill that would send capital into railroads and highways could trigger interest in companies that are involved with infrastructure development. Combine this with the need for jobs, and this becomes a sector to watch.
• Solar & Wind: Lobbyists wasted no time pushing their agendas after Election Day. The solar players are looking for the new administration to rescind tariffs on imported solar cells and modules. The wind industry is looking for the government to raise its procurement targets for renewable energy and all for more offshore wind farms.
Both wind and solar lobbyists are pushing to have new tax credits created that would boost their industries, and these credits would require congressional action. If passed, it will be a sure boost to these energy saving companies.
2. Inflation
When the US government issues stimulus checks, it adds more dollars to the economy. More dollars chasing the same amount of goods raises prices on goods. If we have less goods, due to COVID slowdowns of production across the world, it can accelerate the price of goods more quickly. We are watching this very closely as this issue can have a negative impact on the stock market for 2021.
3. Rising Commodities & Metals Prices?
I get many questions about commodities and especially gold. The price of gold had a strong showing in 2020, breaking the benchmark of $1,800 per ounce, and we will be attentive to continued strength or weakness. Traditionally, a few factors that affect the price of gold include inflationary pressure, times of uncertainty, and interest rates, among others.
4. Restaurant & Travel Sectors – Pent-Up Demand?
Given all of the progress on the vaccine front, there could be significant shifts in consumer behavior throughout 2021. Clearly, the travel and restaurant sectors have been some of the most adversely affected by the virus. This sector has been recently named “BEACH,” which is Bookings, Entertaiinment, Arilines, Casinos and Hotels. To survive the pandemic, some restaurants have adapted to delivery based models, utilizing companies like Uber (NYSE: UBER) and Doordash (NYSE: DASH). However, with this shift, a restaurant’s bottom line can be affected while the delivery infrastructure companies get their cut. Will the vaccine provide the confidence needed for people to return to dining out? Will the municipalities that have the most stringent restrictions on dining out tighten them or relax them? These factors and more will certainly contribute to the capital inflows to the restaurant sector in 2021. We are starting to see more relaxed approach to restaurants in 2021 and this is a leading indicator as we have to eat, but not necessarily travel.
The travel sector is also experiencing similar uncertainty surrounding anticipated consumer behavior. In an October 2020 survey commissioned by Hilton, 95% of respondents who travel said they miss traveling, and 94% plan to travel once restrictions are lifted. Those are large percentage numbers. As many Americans have experienced recent holidays without family and loved ones, this demand could be further reinforced. Industries to watch include airlines, hotels, casinos, cruise lines, and online travel services. In its December 2020 IPO, Airbnb (NASDAQ: ABNB) created around 100 billion in market capitalization; surpassing the combined market capitalizations of Marriott, Hilton & Hyatt combined. Wow. Is this a sign of further strength to come in the space? Or is it over-hyped?
These are just a few of the topics that are at the forefront of the investment community at this time.
If there is anything that I can do to help, please give me a call. If you know of someone that would like to added to our emails, or in need of help, please let me know. As always, I’m here when you need me.
Sincerely,
Craig