It’s that time of year when we stock market pontificators write about what we expect in the new year. But first let’s see how we did with last year’s estimates. It turns out that even with the monkey wrench COVID-19 threw at us, we did pretty well.
Here is the recap, with last year’s predictions in italics:
1. 5G Winners
The 5G rollout is happening now. Phones will become 100 times faster. Cable TV will be a thing of the past as streaming goes mainstream. Apple is launching its first 5G iPhones. Massive cord cutting will benefit Verizon and AT&T. Chip companies and cell tower REITs will also benefit.
Well, this was a big and obvious winner. Granted, AT&T was down and Verizon was flat. But the stocks I recommended to my readers in Bull and Bust Report were up big.
The chipmakers led the way with Broadcom (NASDAQ: AVGO) up 91% and Qualcomm (NASDAQ: QCOM) up 151%. And the four cell tower REITs were up between 30% and 53%, not counting hefty dividends.
2. Bitcoin Jumps 50%
Despite being cut in half last year, Bitcoin still leads all other asset classes this year with a 95.5% gain. It will take on another 50% gain next year as the block rewards for creating new Bitcoin get cut in half in the middle of the year. That said, the bottom isn’t in yet. It will fall more before it goes up.
I nailed this one. Bitcoin started the year at $6,985, fell to $5,238 a few months later, and then went on a rampage and today sells for $19,119. However, I must admit I underestimated its upside. Instead of a 50% gain, it is up 173% year to date.
3. Semis
The PHLX Semiconductor Index (NASDAQ: SOXX) has soared 55% this year. The run will continue as the market expects that 450 million smartphones will be shipped in 2021 and 750 million in 2022. The reduction in China trade tensions will help. Intel (NASDAQ: INTC), Micron (NASDAQ: MU), NVIDIA (NASDAQ: NVDA), Marvell (NASDAQ: MRVL), and Qorvo (NASDAQ: QRVO) give you equity exposure.
I’m three for three. Here is the SOXX:
The two heaviest-weighted companies in the SOXX right now are, unsurprisingly, Broadcom and Qualcomm. Full disclosure: I own shares in both of these companies.
4. The Federal Reserve Will Hold Steady
The Fed announced no change in interest rates at the last Federal Open Market Committee meeting. The election year will keep the Fed from acting. However, it will continue to add liquidity in the form of its “Not QE4,” which has added more than $1 trillion to the markets over the past few months. Major banks such as JP Morgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) will continue to do well.
Well, you can’t win them all. COVID-19 happened and the Fed cut rates to 0.05% in May 2020. The effective rate is now 0.09%. The banks are all down about 15%.
5. Russia
Russia has a solid balance sheet, its debt-to-GDP is just 13.5%, and it has reduced inflation below its 4% target. The Ruble is up. New oil and gas pipelines to China and Germany will see continued gains in Gazprom.
A draw. Russia sold off with the rest of the world in March but has since climbed back to breakeven.
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6. Greece Has Finally Turned the Corner and Had the Best Emerging-Market Return of Any Country
Ten years ago, Greece was in its deepest post-World War II depression. Now it is experiencing organic recovery based on smart policy changes.
The country’s new prime minister, Kyriakos Mitsotakis of the centrist New Democracy Party, has initiated a package of reforms to improve the Greek business climate and attract foreign direct investment, including tax cuts, a streamlined welfare system, and an accelerated repayment schedule for the country’s IMF loans.
The Athens Stock Exchange composite index is still down by 83% from its 2007 peak, and GDP is off by 25% from that time.
However, Greece’s PMI is over 50. Consumer confidence is at the highest level in two decades. FDI is up, and bond yields have fallen below Italy’s.
Wrong. Greece was crushed by COVID-19 as tourism dried up. The Greece ETF (NYSE: GREK) has come back recently and is down 17% for the year.
7. IMO 2020
New international shipping rules on fuel oil will push the cost of low-sulfur fuel oil much higher. It is already happening. On November 3, Saudi Aramco raised its price for Arab Extra Light by $4.65 per barrel (bbl) over its commodity-grade Arab Heavy for December sales into Asia. Note its September premium was $1.05/bbl, with October’s rising to $2.65/bbl. This trend will continue.
Wrong again. Demand for oil dried up this year as tankers dropped anchor. Arab Heavy and Arab Light now trade at the same price of $50.58 per barrel.
8. Fintech
The use of financial technology coupled with big data and artificial technology will continue to push benefits to the consumer and profits to the companies that have scale. Transaction speed will increase as well as targeted advertising and peer-to-peer payments. The world is going cashless, and Zelle will be your new friend. Companies like Ant Financial, Xero, and SoFi will continue to grow. Ark Fintech Innovation ETF (NYSE: ARKF) is the ETF to watch.
Nailed it for an easy double.
Next week I will tell you — for the low, low price of free — what will happen in 2021. Stay tuned.
Happy holidays,
Christian DeHaemer Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
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