Focus: The big investment themes ahead
Interest in thematic investing, unconstrained by sector or geography, is booming. Crypto, energy, vaccines, and big-tech led this year. Online retail, gene editing, cannabis, and China lagged. We focus on six themes for next year. Renewables (investment needs to triple) to EV’s (only 1% cars electric today). Re-opening (40% world now fully vaccinated) to China (the worst performing big market this year). Alongside crypto (accelerating adoption) and the metaverse (see gaming early-adopters). See 45 smart portfolios.
Market relief as Fed tapering finally starts
Equity markets saw new all-time highs last week, with relief as the Fed started its long-awaited bond tapering. US Q3 earnings stayed strong, up 41% versus last year, and GDP forecasts are now rebounding. This boosted tech, consumer, small cap stocks and also the USD. Commodities and bitcoin took a breather after recent strength. See our latest presentation here.
Small caps to ride economic rebound
Small caps (IWM, IJR) rebounding. They benefit from the virus-driven economic rebound, with valuations at decade lows, and profits strong. US GDP growth forecasts have surged to 8.2% this quarter, up from 0% in Q3. Growth next year will be 4%, near double the average.
Revisiting the re-opening stocks
‘Re-opening’ stocks, from hotels to cruises, should accelerate. Avis (CAR) price doubled after strong results. But all should benefit as virus cases have plunged and is room for lockdowns to ease. Out 15-stock reopening index runs from Boeing (BA) to Marriott Hotels (MAR).
Stand-off between stock and bond investors
We see equities supported by robust profits growth, with bond yields to stay low. Our cyclicals sector focus (such as XLE, XLF) provides the protection of lower valuations and exposure to the near-term growth pickup.
Altcoin catch up and Stablecoin regulation
Bitcoin (BTC) held near $60,000, whilst alt-coins saw sharp performance catch ups. Solana (SOL), Polkadot (DOT), and Avalanche (AVAX) amongst those with 20% or more gains. By contrast, meme dog coins, DOGE and SHIBAxM, fell after dramatic surges. The long-awaited US stablecoin report urged more regulation.
Commodities eased after strong rally this year. Oil saw cross-currents of rising US inventories but OPEC+ maintaining gradual supply increases. Aluminium weak as Russia may remove export tax in supply boost to global markets.
The week ahead: Big consumer week
1) Inflation focus in the US (est. 5.5%) and China (1.4%), as central banks look to tighten policy. 2) End of COP26 UN climate conference focus on net-zero implementation, coal, and carbon taxes. 3) China’s Singles Day, the world’s largest retail event. Important for BABA and JD US. 4) Wind down of US Q3 earnings season includes reports from PYPL, COIN, DIS, and AMC.
Our key views: Growth is rebounding
We see a positive outlook of 1) vaccine rollout and economic re-opening, and 2) still huge policy support, offsetting ‘stagflation’ and Fed risks. We see the ‘wall of worry’ giving way to a ‘Santa rally’. We like equities, commodities, crypto, and are cautious fixed income, and the USD.
Written by a team of experienced financial analysts at eToro.
This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results.