Last week we wrote about trends that we think will continue into 2021 from 2020. Big technology shifts across AI, 5G, IOT, Blockchain and so forth are going to disrupt and accelerate change across many industries. Banking & Finance is one industry for example that is being challenged by the growing defi (decentralized finance) markets which now have north of $20 billion of assets in their ecosystem. We expect this trend to innovate and grow rapidly providing a growing number of options and products to serve the market.
With a new incoming administration, the stimulus packages will continue. Aside from the growing national debt and its staggering size, this continued onslaught of money flooding into the economy will continue to fuel inflation and devalue the US dollar. The latter alongside low interest rates will force asset managers and every day investors and retirees to seek yield that can offset the loss in value of holding cash.
1. The enormous injection of monies into the economy will cause most quality hard assets to rise in value
2. The stock market will continue to perform well but with one or more 10%+ corrections along the way
3. While everyone is eager to see COVID in the rear mirror, it will take more time to get to a critical mass of people vaccinated. However, as we approach that point, we think that pent up demand and a wave of renewed optimism will spark renewed spending and investment. The 2nd, 3rd and 4th quarters of 2021 will see some good numbers which in turn will fuel hope for a post-COVID new normal.
4. Alternative hedges to inflation such as gold and Bitcoin will continue to enjoy strong demand in 2021. We are now seeing corporations invest a portion of their treasury into Bitcoin such as Microstrategy. More investment funds, mutual funds and foundations are now seriously considering this after investment fund icons such as Stanley Drukenmiller and Paul Tudor Jones announced their investments in Bitcoin last year. Grayscale has almost trebbled its AUM (assets under management) in 8 months, now up to $23 Billion. Wth PayPal, Square and other cash apps adopting digital assets for their client base, demand is rising.
5. Some continued rotation into industry sectors that have been badly hurt by COVID is inevitable as the vaccine programs gather steam.
These are some of the trends we see gathering momentum in 2021 as we all wait for COVID to be behind us!