Here is a recap of our live Q&A session held on 2/12/21 presented by Joe Randazzo JD, CFP® from FNA Wealth Management and Dave Stone CPA, CFP® from Tartan Wealth Management.
Details for our next session, 2/26/21, can be found here.
With the market continuing to rise, where do you see opportunities today?
First, it’s important to remember last year’s recovery and where a great deal of the performance came from. We reviewed growth versus value on every call, so those that have been with us for a while know that it wasn’t necessarily the “market“ that really took off as much as it was growth stocks that pulled the index up with them. Now, although the broad index has continued to hang in there and creep higher, there are different drivers to what we’re seeing today. The opportunities I see are those that are late to the game and have jumped in the driver seat more recently. Specifically, sectors like industrials, pharmaceuticals and healthcare in general, certain segments of real estate, and even some pockets of technology like semiconductors.
Keep in mind that we never recommend chasing performance or predicting where the market is going. Nor am I recommending any of these areas deserve more exposure in a portfolio of anyone on this call. Rather, my opinion on where there may be some opportunity today might be taken advantage of either with new cash infused into a portfolio or rebalancing and taking some gains from elsewhere and certainly to be considered with your respective risk tolerance and time horizon.
With the progress made on the vaccine and a stimulus package nearly done, what other risks do you now see facing the market this year?
- Change in administration always presents challenges in the short term. While we believe it is unlikely to see changes in the tax code anytime soon, it is no secret that President Biden would have changes made if he could. We continue to monitor news out of Washington on whether taxes will hit the agenda this year. If so, we could see some added volatility.
- Corporate earnings will continue to be in focus. Many companies have refrained from offering guidance for the past year due to all of the current uncertainty surrounding Covid. That said, a couple months ago I mentioned that Wall St has its own way of creating estimates and expectations for corporate America, and Q4 earnings seems to have mostly met those expectations. Expectations are high for Q3 and Q4 2021 as many expect a big uptick in economic activity with the vaccine being distributed. So earnings for those quarters will be watched closely.
- Continued jobs creation will also be necessary. We believe the market has priced in ongoing improvement of jobs numbers, so any disappointment may also add some pressure.
- While we do not expect inflation to be a major issue in 2021, interest rates and inflation will likely also be in focus. Treasury yields increased significantly right after the election and the Ten Year continues its slow rise. Rising interest rates in the early stages of economic recovery next year could cause some challenges.
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.
Investing in the real estate market can be more complex than the securities markets, especially in terms of liquidity and flexibility.
Portfolios are rebalanced by buying and selling securities that have changed values in order to restore their original proportions in a portfolio. Rebalancing may result in a taxable event.