Translation to English
A stronger year for equities? Wall Street gurus are telling to invest more
Soyoon Kim for Newsway
January 21, 2021
In a year when the whole world was under a cold spell of the COVID-19 pandemic, global equities became hotter than ever before, catching many by surprise. Expectations are high that the economy couldn’t get worse than ‘the worst 2020’, but so is the doubt on whether stocks could remain strong. Some are arguing global stocks have reached their ‘peak’ after a whopping surge last year.
It sounds plausible, considering US equities’ muted response to Biden’s ambitious $1.9 trillion fiscal stimulus package. The market has been sidling along for more than a week before finally inching up early morning on the 19th.
Even with the growing anxiety over a continuous bullish trend, some of the world’s top investors recommend “to stay in the market, nevertheless”.
Such optimism is mostly supported by vaccines, a ‘weapon’ to COVID-19 already being rolled out to key countries as well as the closing of the US presidential election, one of the biggest risks from 2020.
One such big investor looking on the bright side is Ohad Topor, chairman of TCK investment, who sees equities as the most attractive asset this year. “The outlook is positive for risky assets in 2021” amid an anticipation that growth rates will recover as we begin to receive vaccines.
“We may be in a late-stage bubble for all assets. Even if it’s the case, investors should stay invested as they can still generate high returns. They don’t have to worry about a sudden plunge as long as they manage risks well.” When asked about KOSPI hitting highs since late last year, he explained “KOSPI is a cyclical market and it’s normal to gain faster than global equities in the upside phase of the cycle.”
Larry Fink, CEO of BlackRock, chimes in. “I think we’re going to continue to see the market to be strong into 2021. We are persistently seeing investors worldwide under-invested, not over-invested, in long-term assets, and the best source of long-term assets are equities. I don’t see any trigger for a market bubble.”, added the leader of the world’s largest asset manager.
Some voice that the fear of a market crash is too exaggerated as the global economy is seen bouncing back driven by vaccinations. “The S&P 500 is worth about 22 times predicted corporate earnings (net income) for 2021, higher than the long-term average of 16, but lower than the 30 hit before the Dotcom bubble burst. It’s not quite over-inflated to worry about a slump.”, according to Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management.
Others believe that the outcome of the US elections last November – no clear winner both in the Senate and the House- will provide a tail wind for the market. Ken Fisher, chairman of Fisher Investment, stated, “A gridlock in the divided Congress will render big legislative change dead on arrival. That’s great stock market news.”
Bill Ackman, billionaire investor and founder of Pershing Square Capital Management, expects further stock market gains, along with a rapid economic recovery led by the new president-elect. “You can have some leaned-up companies coming out into a very strong environment, so I think there’s a pretty good chance for a very strong stock market next year”.
Meanwhile, an analyst leading a tech analysis team at J.P. Morgan finds that investors are getting tired and frustrated with US tech stocks. “As major tech companies have become weak this year, investors are thinking about shifting to other sectors.”
In fact, Netflix has slipped 7.21% year-to-date followed by a strong performance last year, joined by other tech peers - Facebook (-4.41%), Amazon (-4.18%), Apple (-3.66%) and Microsoft (-2.69%).
Under these circumstances, a slew of investors, including retail investors from western countries, are wary of the future path of tech companies, wondering if it’s time to reduce tech exposure given the previous spike, or if tech firms will remain on an upward trajectory.
Wall Street strategists attribute the recent tech dip to a higher possibility of regulation on tech corporations since the new administration came into office, seeing no reason to give up hope for potential gains.
Mike Pyle, BlackRock’s global chief investment strategist, forecasts a strong year for tech and healthcare. He thinks it’s especially beneficial to the US stock market which has a higher share of quality companies in sectors with longer-term growth trends, like technology and health care.
Moreover, most of Wall Street analysts are maintaining ‘buy’ recommendations on technology firms- 26 out of 44 for Netflix, 43 out of 49 for Facebook, 46 out of 49 for Amazon, 29 out of 40 for Apple, and 31 out of 34 for Microsoft.
Views are split on Tesla, however, which has been most favored by western retail investors and has shown an outstanding performance. Topor said, “Tesla is bigger than the top 7 carmakers combined, which is highly worrisome.”
Some of the largest players are sending a warning message about an overheated stock market. Billionaire Carl Icahn has recently warned that the market could go into a ‘painful correction’, which he’s hedging against accordingly. “It’s very concerning that people are into a sort of buy everything mode. Money is pouring into the market, driving things even higher”, said Dick Parsons, former Citigroup chairman.