With the markets by and large closed, the Christmas break provided me some time to relax and research. To consider new investment opportunities beyond the radar, which we’ll be announcing in coming weeks.
2020 has changed everything. 2021, more than ever, will be the year where investors will likely succeed by going against the herd.
Governments around the world have taken a big hammer to deal with the woes of the worst pandemic since the Spanish Flu.
- Operation Warp Speed accelerated the development and distribution of Covid vaccines. The usual funding brakes on vaccine development were removed.
- Mass QE (quantitative easing) flooded locked-up economies with new money. Plunging interest rates to among their lowest levels ever.
- Trump, though it seems reluctantly, signed another coronavirus relief and stimulus package in the US this week.
- Finally, a comprehensive trade deal between the EU and departing Britain was negotiated. As leaders pulled out all the stops to smooth trading on both sides.
We have the odd situation where, despite being dealt body blow after body blow, stock markets are set to lift. On the hopes of a vaccine-smoothed recovery. Alongside the continued high tide of new ‘printed’ money.
The real risk is that 2021 is the year we truly pay for coronavirus. When cash becomes more worthless. And, as we’ve seen throughout history, inflation gets away on us.
So, at the start of 2021, we could see a burst of growth in the markets. Then, in the medium-term, rising interest rates to counter inflation.
At that point, any assets that have ridden unreasonably high could find their values in a vice grip.
With that in mind, I would warn on residential property in certain cities and countries. In particular, New Zealand and Auckland. And in the stock markets, hot tech stocks that have become inflated far beyond any reasonable assessment of their present or future earnings.
Remember, prices tend to reach their highest peak before an avalanche begins.
Beware of the 3 Ts.
I’m talking Tesla, Tech, and Taiwan…
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