January 08 2021

Are There Any More Economic Surprises?

No one seems to believe there are. The dice are cast, aren’t they? Governments pledged to provide unbounded aid in an effort to bridge the return to full economic activity. Fed is maintaining a policy of financial repression. The US Dollar is in the doldrums.

No surprise left, as the sad news is all out on the table: unemployment is still high, corporate leverage increased for smaller firms, defaults for speculative companies are at a 10-year high, and the pandemic is at its peak. Besides, threats to democracy have reached their climax with an assault on Capitol Hill. What worse piece of news is left out there, really?

Markets love everything about political and economic certainty, even in the darkest time. What they price in the stock value is now “hope”. And hope is priceless. It’s the most irrational, yet most powerful factor in humanity and trashes everybody that goes against it. Bitcoin and Tesla bear shorts can tell you a story or two about this.

Hope is also flimsy and easily frayed. Four years of systematic dismantling of world organizations, have left the planet prone to the establishment of a new order. Glass will feel either half full or half empty depending on what side of the new order you are. More tech, more China, less fossil fuels, higher asset prices…will affirm the prevalence of data VS natural resources, software rails VS moats, intangible VS tangible, East VS West, brain VS hands, hackship VS warship.

Here are a few themes that should leave your investments on the bright side of the shift: clean energy, clean water, at-home consumption, cloud-based software, copper & lithium for EV batteries, social engagement platforms, crypto software, virtual healthcare, and online education.

With all this, we wish you love and health for 2021.

360 Advisory – Markets