Investor Column | Goodbye and good riddance to 2020. Here’s a look at what might happen next year

What a year. Is there anyone sad to see it leave in a little more than a month?

With several vaccines getting ready to launch as early as December, let’s get excited about next year. I believe we are seeing the light at the end of the tunnel.

With this being my last article of the year, I would like to pass along some of the views of the markets for next year by some of the big names on Wall Street.

It looks very much like we will have a divided government. According to State Street research, markets like gridlock. With gridlock there typically will be no new taxes or extreme measures. Market trends will enforce the search for yield and growth stocks.

Sector participation is expected to spread out and do well in 2021. This year the market has been appreciating but on the skinny trade. Only a handful of companies, particularly large cap tech stocks, participated. It is expected that technology and healthcare, as well as large cap and quality companies, will lead the way again next year. Small cap companies may benefit as well. It would be great to see a broad stock market participation next year. The skinny trade increases risk to the investor.

Next year, according to Blackrock, we will likely see a focus on sustainability, re-regulation and a more predictable trade policy. That could bode well for emerging market assets.

Asia has done well controlling the virus and it may be wise to look at Asia ex Japan as an emerging market position.

Climate policy will likely be a major focus beginning next year. The United States is expected to rejoin the Paris Agreement global accord on climate change. Spending on renewable energy infrastructure is likely to grow globally. Interest in solar energy has been soaring, according to Raymond James.

There are fewer than 20 exchange traded funds (ETF’s) that invest in solar and clean energy. That may be a good place to begin if you want to participate in that/those sectors.

The Federal Reserve has been extremely accommodating to the markets and should continue doing so in 2021 and beyond. There is a lot of cash sitting on the sidelines and we may see FOMO (fear of missing out) investors begin to deploy some of their cash holdings.

Not everything is rosy for next year. By the way, if anyone ever tells you that everything is rosy it is probably time to reduce risk.

COVID infection rates are currently rising once again at an alarming rate. Even with a vaccine as early as next month, it will take well into next year before we have widespread availability of the vaccine. We are seeing shutdowns in Europe and in some areas in our country.

There is a need for fiscal stimulation if we are to soften the blow to the many people that will lose benefits at year end.

Mega-cap technology companies are likely to face greater regulatory scrutiny. Anti-trust issues will be about such things as wages and platform power. While investors may do a little gnashing of teeth in fearing a breakup, I would encourage a look at the history of breaking up of large companies. Early in my career there were investors like T. Boone Pickens that broke up large, inefficient companies and released a tremendous amount of value to investors. The anti-trust breakup of AT&T also created a lot of value and change. When’s the last time you used a pay phone, If you can find one?

Probably the most concerning thing to me is that the Federal Reserve may be losing its independence. It’s early in that process, but it would be a disaster for the Fed to lose its independence.

The most important advice is to stay focused on the long-term. Stay diversified and know and understand your asset allocation.

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I would like to note the passing of great friend and mentor John M. Lineweaver. He was my inspiration when I began my career with E. F. Hutton. Work hard and put the client’s interest first. He recently passed away at the age of 87. Thanks, my friend.

Michael T. Doll, A.A.M.S., is an investment planner with Harbor Financial Services, can be reached at 941-896-2473 or at mtdoll@harborfs.com. Visit michaeltdoll.com This is the view and /or opinion of Michael T. Doll and not necessarily the views and /or opinion of Harbor Financial Services, LLC and SEC Registered Investment Advisor, whose main office is located in the state of Alabama.