- Rising stocks.
- New leaders.
- Diversify & risk.
Unfortunately, as with everything in life, no one can predict the future. This includes being able to determine what exactly the market is going to do. However, during the first of the year, many researchers and investing analysts try to predict what they think might happen during the year to the stock market. If you are interested in the 2021 market outlook, here are a few of the current predictions about what might happen in the stock market this year.
The distribution of covid 19 vaccines are expected to pick up during the first half of the year. As this occurs, the global economy will begin to recover. Analysts feel that the global economy will grow throughout the year. The economic output for the United States in 2021 is expected to go up around 5.5 percent, with recovery continuing from the third quarter of 2020. Throughout the regions of the world, a bounce back is expected, with a growth ranging from 3 to 8 percent.
An economy that is growing is good for corporate earnings. On average, analysts expect the economy to grow by about 21 percent. There are some analysts who feel that this is a bit high. The potential for 25 percent growth in S&P 500 earnings is not out of the question. This is boosted by companies becoming more efficient during the pandemic. This compares to an average growth of about ten percent throughout the past ten years.
This growth should be good for stocks. For example, J.P. Morgan expects investors to jump into the market during the first few months of the year. This exuberance will likely wear off during the latter half of the year and it is expected that the S&P 500 will end up between 4200 and 4600, which is an almost sixteen percent increase from the current levels.
It is important to note that you should not shove all of your money into the stock market because of the expectations. If you are keeping your money on the side to wait for a pullback to present an opportunity to buy, you might be waiting for a while.
Even though 2020 was full of turmoil, stocks ended up having a pretty good year. The S&P 500 had an 18 percent return. However, not everything did well. Technology names, particularly those that benefited from the shift to working at home for many Americans, saw extremely large returns. However, there were many companies that were shuttered because of the pandemic and these stocks plummeted as a result.
One shift that is expected is with the leadership with smaller company stocks. While megasize firms had many of the gains during the depths of the pandemic, the analysts from Wells Fargo expect that throughout 2021 to be led by smaller firms. Larger companies are expected to underperform the average stocks.
A comeback from consumer firms such as those in the restaurant, hotel, and leisure industries is expected. As the vaccines are distributed and people start going back to normal, travel will become more popular again and these industries should start to bounce back.
One of the best things that you can do this year when it comes to investing is to make sure that your portfolio is diversified. You should make sure to spread bets on different types of investments. This includes different size firms, and companies located in other countries. Even if your portfolio was diverse during 2020, it is important to check on it and move some things around to ensure that you are not keeping all your eggs in one basket.
While analysts are providing quite a good outlook for both the economy and the stock market, it is important to acknowledge that investing in anything does not come without any risks.
Across the board, analysts expect rising interest rates and inflation, market forces that no stock investor likes, should stay away during 2021. Most think that a centrist government is not going to pass any type of legislation that is going to ding larger companies in the United States with stricter corporate regulations or sweeping tax hikes.
However, even with all of the positives, there are still risks. As this article started, no one can predict the future. Even the best analysts did not predict the aftermath of a pandemic and the toll it would take on the market. If there is one thing to learn from this past year when it comes to investment it accounts, it is that you should always have an emergency fund available.
An emergency fund should consist of enough to cover at least six months to a year's worth of expenses. While this sounds like a lot, starting out small with something that you can do is a good idea.
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