The 2020 Pandemic Is Fueling 2021 Growth
Back in March, if someone told you the stock market would finish the year with a double-digit gain, you’d have thought they were crazy.
The world’s economy was shutting down.
The stock market was crashing.
And there was no end in sight.
But Americans pushed through the pandemic.
And things started to turn around. The stock market closed above average for the year — with gains of 15%. (The average the market returns per year is about 10%.)
And this is just the beginning.
The pandemic has still delayed economic progress. That progress will begin catching up in 2021.
This year, we’ll start to see the economy ramp back up. And that will fuel even more gains for the stock market.
Don’t believe me?
Just look at earnings. Here’s what they’re telling us to expect in 2021…
Earnings Tell Us 2021 Will Be Even Better
Four times a year, companies in the S&P 500 report earnings and give investors a glimpse at what is going on financially. Companies report their sales, expectations for the next quarter, expenses and more at these events.
Many consider it the most important times of the year for individual stocks.
I have a passion for studying earnings in the stock market. I’ve designed a whole system around earnings for companies in the S&P 500.
No matter how you look at it, earnings dropped sharply last year.
With the pandemic, corporations like airlines, cruises, movie theaters, restaurants, malls and more struggled as consumer activity was forced to slow. Despite the S&P 500’s 15% return in 2020, earnings for the index’s companies plunged 13%.
This was the worst decline in earnings since, you guessed it, 2008 — the global financial crisis. Back then, earnings dropped 25.5%.
What’s important now is what happens next. And expectations for 2021 are signaling the right moves.
Based on Wall Street analysts’ expectations, earnings are projected to rise more than 20%.
That would be the strongest growth we have seen in corporate earnings in the past six years.
And it’s just getting started.
Our economy has a way to go to correct for the slowdown we experienced in 2020. And we can expect that strength to carry the markets higher beyond 2021.
With the market up 15% this year, it may be hard to believe.
But if this year was an example of anything, it’s that the stock market is more resilient than any of us imagined. It also has the potential to go higher than we may think is possible.
How You Can Capitalize on This
In 2020, things were bleak. With the global economy on pause for most of the year, earnings fell off a cliff.
But all that can be put behind us.
Vaccines are rolling out across the country and consumers are itching to pour back into the streets and have a seemingly normal 2021.
Corporate earnings are going to be on the rise — and so will the S&P 500.
With earnings being such an important event for these individual companies, stocks see a ton of volatility around the announcements.
That’s why I don’t gamble on the event, but use my favorite tool in the stock market to capitalize on mispricings that occur after earnings.
I have developed a strategy around these earnings events, and I use options to profit. Unfortunately, my research on this strategy isn’t open to the public right now.
But there’s one place you can see some of my ideas…
And, even better, you’ll get early access to my strategies around earnings when they do open back up to the public.
It’s all a part of something I put together last year — one of the best options education courses in the business.
I take advantage of these earnings setups using options. And if you’ve never traded options before, you need to be a part of this. Even if you are comfortable with options, my free weekly letter takes you even deeper into profitable concepts to keep you on the right track.
Chad Shoop, CMT
Editor, Quick Hit Profits