What Should I Invest in Right Now for 2021

TL;DR

For 2021, the speaker favors value opportunities in financials, energy, and healthcare while keeping cash available and watching vaccine and stimulus developments. The S&P 500 trades above 22 times expected earnings, 39 percent over its 10-year average, while energy stocks have fallen 51 percent. Read on for the market evidence, major risks, and investment strategy behind this outlook.

Transcript

bow tie nation joseph hogue here with the let's talk money channel and thank god 2020 is almost over really though i got to feel sorry for all the kids born this year because from now on they're going to tell someone the year they were born and it's just going to be cringes and oh that sucks but putting the year behind us also means getting ready f... Read More

Key Insights

• "at the price of over 22 times expected earnings the market is now 39 percent more expensive than that 10-year average" (2:01)
• "consumer discretionary is up 21 tech stocks are up almost 30 this year but not everything is as expensive" (2:25)
• "stocks in the energy space have plunged 51 with financials and real estate both in the red as well" (2:37)
• "restaurant reservations are still down 40 percent from last year and retail store traffic is down to 10 to 20 percent" (5:14)

Questions & Answers

Q: What should I invest in for 2021?

The speaker identifies financials, energy, and healthcare as potential value areas because they are not trading as far above their 10-year average valuations. The broader strategy is to favor these less expensive sectors while monitoring vaccine approval, stimulus, and the economy.

Q: Is the stock market expensive going into 2021?

Yes. The market trades at more than 22 times expected earnings, which is 39 percent above its 10-year average, and the speaker says a more expensive market had not appeared since the tech bubble of 2001.

Q: Which sectors may offer value in 2021?

The speaker points to financials, energy, and healthcare as sectors where value may still be found. Their valuations are not as elevated relative to their 10-year averages as those of consumer discretionary companies, technology stocks, and industrials.

Q: Which sectors drove the market higher in 2020?

Consumer discretionary stocks rose 21 percent, while technology stocks increased almost 30 percent. The speaker says sharply rising prices in these sectors, alongside declining earnings, helped make the overall market expensive.

Q: Why does the speaker consider energy stocks a potential opportunity?

Energy stocks had plunged 51 percent, making the sector one of the weaker performers discussed. The sector also was not trading as far above its 10-year average valuation, so the speaker includes it among the potential value areas.

Q: What could drive stock prices in early 2021?

The two main drivers identified are a potential vaccine and new stimulus from Washington. The speaker expects vaccine approval to boost investor and economic sentiment, while additional stimulus could support stronger growth.

Q: What risks could challenge the market outlook for 2021?

The speaker warns that vaccination could take at least a year to reach herd immunity and allow people to feel some kind of normal. Economic activity also remained weak, with restaurant reservations down 40 percent from the prior year and retail store traffic down 10 to 20 percent.

Q: Why might investors keep some cash available?

The existing page guidance says cash provides opportunities to buy lower-priced stocks. This flexibility supports the broader strategy of staying ready for market changes while looking for value investments.

Summary & Key Takeaways

• The stock market is currently expensive, with the S&P 500 trading at over 22 times expected earnings, 39% higher than its 10-year average.

• Some sectors, such as consumer discretionary and tech, are significantly more expensive than their 10-year averages, while others like energy and healthcare offer value.

• The two major drivers for stock prices in 2021 will be the potential vaccine and additional stimulus packages, influencing investor sentiment and economic growth.