It’s the season of Wall Street predictions, so I’m throwing my hat into the ring to offer 21 projections (guesses) for 2021. If I predict all 21 correctly, I’m sure to garner immense fame and fortune. I may even be herald as the next great futurist with book deals, movie offers, and television appearances to follow. If I’m wrong and all my ideas fail, there’s no downside because most forecasters are wrong about the future. If you need proof, look no further than 2020. How many experts, gurus, wizards, pundits, and pontificators correctly predicted a global pandemic, a stock market crash, working from home, or the rise of Peleton? I will tell you – none.
Here are my 21 predictions for 2021.
- The 100-year average annual return for the S&P 500 has been 10%, so the stock market will earn 10% next year.
- The current inflation rate is 1.18%, well below the 106-year average of 3.22%. Inflation will stay below 2% for the first half of the year before rising above 2.5% during the second half as we emerge from our COVID quarantines.
- Pfizer, Moderna, and other pharmaceutical companies will distribute the COVID vaccine globally, and global economic activity will escalate in the second half of 2021.
- The yield on the 10-year US Treasury note is .95%, far below the 58-year average of 6.02%. The rate will rise above 3% as inflation returns.
- Small-cap stocks will outperform large-cap stocks. For the past six months, the small-cap index has outperformed the NASDAQ and S&P 500; this trend will continue.
- International stocks will outperform US stocks. Since June, they have bettered the NASDAQ and S&P 500.
- Long-term bonds (20+ years) will deliver negative returns next year as inflation returns and interest rates rise. The iShares 20+ Year Treasury Bond ETF (TLT) is down 2.5% since June. If interest rates 1%, the price of a 20-year bond will fall approximately 15%.
- Working from home stocks (DOCU, PTON, ZM, etc.) will fall in price as we return to our offices and leave our homes, and investors focus on valuation metrics like earnings and cash flow.
- The US Gross Domestic Product growth rate will rise above 5%, well above the 73-year average of 3.16%.
- Prices for vacation homes will continue to surge as families escape big cities like Los Angeles, San Francisco, Chicago, and New York. Ranches, beach homes, and mountain cabins will remain popular investments. My home town of Austin, Texas, will be a significant beneficiary of this trend.
- Companies will allow their employees to work from home or anywhere, further depressing corporate real estate valuations like office properties.
- Bitcoin will replace the US Dollar, the Euro, the British Pound, and the Yen as the global currency. Not really, but it will remain a volatile alternative asset class similar to gold, oil, or timber. PayPal and Square will expand their Bitcoin offerings, so Bitcoin’s price should continue to rise.
- The unemployment rate will fall below 5%. It currently stands at 6.7%, and the 72-year average has been 5.77%.
- US public debt will climb above $30 trillion as Washington pumps more stimulus money into the economy. The current balance is $26.48 trillion. The increase in debt will have little impact on interest rates or the stock market.
- Merger and acquisitions will be robust next year as corporations look to expand their offerings. Low-interest rates and large cash balances will fuel the M&A boom. Apple will lead the way as they sit on $193 billion in cash and short-term investments. If Apple wanted to, they could even buy a few countries like Hungary, Morocco, or Costa Rica.
- A new Roaring Twenties will start during the second half of 2021.
- Formal dress wear, high-end clothing, and custom outfits will make a comeback as people will tire of wearing yoga pants, sweats, and slippers. No one will be happier than my dad when this happens.
- Charitable donations and volunteerism will rise as people reach out to those economically stranded due to the pandemic.
- National park attendance will mushroom next year as people explore our great nation.
- The Baylor Bears men’s basketball team will win their first-ever NCAA championship under the leadership of Scott Drew – the Wizard of Waco.
- 2021 will be a good year because my mom says good things happen in odd years, and I never bet against her or her wisdom. My prayer is that 2021 will be less odd than 2020.
I was a peripheral visionary. I could see the future, but only way off to the side. ~ Steven Wright.
December 4, 2020
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.
The are predications and guesses only, and actual events may vary.
Data provided by YCharts as of 12/4/2020,
 https://www.cnbc.com/2020/07/30/apple-q3-cash-hoard-heres-how-much-apple-has-on-hand.html, Jessica bursztynsky, July 30, 2020