Your Money
2020's surge in "stay-at-home" stock prices makes sense in retrospect as the nation embraced the use of new technologies, home renovations, and delivery services. While many businesses felt the pinch, others experienced a profits boom. Future expectations for these businesses are quite high. But what about those industries that were hurt?
Profits could grow...a lot
Monetary and fiscal stimulus has already been record-breaking, with more on the way. Furthermore, 2021 earnings will have very easy comparisons. Forecasted profits have already turned more optimistic.
The profits cycle fuels sector/size/style rotation
Markets tend to broaden when profit cycles accelerate. An increasing number of companies begin to grow their earnings, and investors no longer need to pay a high valuation to invest for growth.
Embrace the business cycle
Optimists, who believe profits will indeed rebound, should probably err on the sides of value, small, cyclical, and low quality during 2021.
2021: Embrace the profits cycle
by Richard Bernstein
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