Stocks are on track to end the first trading week of 2021 higher, despite an unexpected drop in jobs last month, turmoil in Washington and the ongoing Covid pandemic.
Here are three experts with their market outlooks for 2021.
Dick Parsons, former Citigroup chairman, is growing more concerned about trouble ahead.
“We’re into a sort of risk-on, buy everything mode. Everything is going up and money is pouring into the market, driving … things even higher. And there seems, in my judgment, there’s a kind of a disconnect that’s going between growth in the market, and the state of the real economy. And eventually, the state of the real economy is going to catch up. And I am concerned that we could see, you know, a bubble bursting and the markets falling precipitously. I mean, this has happened before after melt-ups, market always crashes. And, you know, if it were to crash at a point in time where we have other issues like the pandemic that we’re dealing with or a seriously injured global economy, it could portend a lot of difficulties going forward.”
Mellody Hobson, president and co-CEO of Ariel Investments, sees a rotation to value over growth.
“Growth has trounced value for 13 years. It has been unbelievable, but the pendulum has swung way too far. When you just look at all of the stats, everything from the multiples on the market to the kind of outperformance we’ve seen for growth stocks recently versus the historical norms that we should expect, we’re in nosebleed territory. We’ve started to see a crack in the fourth quarter and in the early days of 2021. And I think we will see that continue with value starting to take the lead. Value should do better in a recovering economy. We looked at 14 recessions since the Great Depression, value outperformed in every single one of them, every single one across all sectors. It tends to do better when profits are rising, when rates are going up, which we anticipate at some point will happen. So I think … better days are ahead for value and the wind will be out of the sails for growth, especially if you see rates rise.”
Ryan Payne, president of Payne Capital Management, said the six biggest market drivers may take a backseat.
“The six stocks that basically drive the performance of the S&P 500 – you know, Facebook, Apple, Tesla now in there, Microsoft, [Amazon], Google – they account for 24% of the index, and the reality of it is they don’t really participate in the reopening of the economy per se. You know, those stocks are already trading at extremely high multiples. They’ve got regulation issues coming down the pipeline and the reality of it is they’ve benefited the most from us being locked inside. You know, I don’t think we’re going to be ordering more stuff off Amazon when the economy reopens.”
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