[2021 forecast] Goldman Sachs expects a 20% gain and Bill Ackman says it will be a "very, very good year". Are you in?
Before I begin, I'd like to state no one can predict how the markets will do.
However, they have always bounced back after a crisis and there's decades of research to back this up.
Beyond the historical data, there's more reason to boost your confidence in the markets next year.
There's no question the last 3 years have been difficult in the markets with increased volatility, a global pandemic and, ultimately, an end to the longest bull run in history.
Even the most resilient and steadfast investors have been tested with many itching to sell their stocks to alleviate the pain of the markets' ebb and flow.
Over and over again, the human mind typically reacts to bad things more quickly, strongly and persistently than to equivalent good things.
This is called negativity bias - our ability as humans to recall negative experiences more vividly than positive ones, as well as the conscious and subconscious actions we take to avoid negative outcomes.
I'd like to believe we've been through the worst of it all with economies already looking at ways of recovering.
Opportunity favours the bold.
Those who gritted their teeth are now enjoying greater returns than before the virus hit.
For those still on the fence about where, how or why to invest, I'd like to explain why now is the right opportunity to take a leap of faith...
The US market is down 10% if you strip out FANG stocks (Facebook, Amazon, Netflix and Google) and most other markets are sitting on similar losses.
Like a good sale - this offers equity investors the perfect opportunity to buy stocks at discounted prices.
Value stocks remain at depressed levels and they are paying investors handsomely as providers of capital (through dividends) whilst they wait for a recovery.
The Fed's recent change from a target of 2% inflation to a moving average target will allow the US economy to run hot for a period, following years of sub 2% inflation.
Combined with the signal that rates will remain near zero through 2023, investors have been provided with the near certainty of almost zero rates and substantial liquidity injections from the world’s pre-eminent central bank for the next three years, at least.
Now, coming back to my opening point, the markets always recover.
In 2008 when the Great Financial Crisis hit, and the world was thrown in turmoil, there seemed no end in sight.
Yet, those who rode out the financial storm, have earned +160% returns to date (S&P 500).
Given the above, Goldman Sachs feels confident that 2021 will likely be a year of strong recovery and growth, promising similar returns.
In addition, a vaccine would be a major boost to confidence and sentiment, and might well herald a period of significant outperformance of value stocks over growth.
So, are you in?