By now, you’ve probably read countless predictions about what will happen in 2021. And you’ve likely noticed similar themes for what will transpire in the year ahead.
That’s because most analysts don’t stray too far from the herd. After all, nothing is worse than being wrong and alone in your prediction.
Ted and I aren’t interested in following the herd. So, today let’s consider three predictions you won’t find in mainstream discussions.
Here they are.
No. 1: Tesla’s Run Is Over, but Others Are Just Starting
Ted explained yesterday that Tesla (Nasdaq: TSLA) is priced beyond perfection and that there are countless reasons why the stock could lose 70% of its value this year.
He’s not a Tesla hater. Neither am I. Credit goes to Elon Musk for making electric vehicles (EVs) mainstream, and the company’s shareholders have been rewarded with terrific gains.
But Tesla’s gravity-defying rally will run out of steam. Its valuations are just silly at this point.
That’s not to say the rally in stocks throughout the EV industry and ecosystem is over.
Companies new and old continue to enter the sector with their own EV lineup, or with technology innovations. General Motors (NYSE: GM) even retooled its logo for only the fifth time in its 112-year history to reflect a pivot toward EVs.
So, in 2021 the EV stock surge will continue. But in this surprise scenario, new leaders will emerge as Tesla struggles under the weight of its own expectations.
No. 2: Cannabis Starts to Get High
In a largely symbolic move, the House of Representatives voted to decriminalize marijuana in late 2020.
Now that Democrats control the upper house of Congress as well, we could finally see action on federal reform. Plus, there are now 15 states allowing recreational marijuana use, which shows broadening support among the public.
But pot stocks have only just started to recover. In the chart below, you can see early innings of a recovery following an 80% plunge in the ETFMG Alternative Harvest ETF (NYSE: MJ). And there should be plenty of upside left should Washington surprise us with cannabis reform.
No. 3: The Fed Is Forced to Pull on the Reins
This year could see the beginning of the end for quantitative easing (QE).
Right now, the mood among analysts is that the Fed will remain inclined to provide too much support to the economy and not risk tightening too soon.
But vaccines are being distributed, and there’s been a $1.5 trillion build up in personal savings just waiting to be splurged. That’s why a summer boom in economic activity (especially among service sectors) could deliver the Fed’s inflation and labor targets quicker than expected.
QE would be the first thing to go, and that would send a jolt throughout the stock market as investors face less liquidity and higher interest rates.
In this surprise scenario, be prepared to deploy hedges for downside protection. That’s why I designed my Flashpoint Fortunes options trading service with the ability to use put options so we can protect and profit from plunging stock prices.
There you have it. Three predicted surprises for 2021, and I’m sure there will be many more.
After all, one year ago, I don’t think many were predicting a global pandemic.
Best regards,
Research Analyst, The Bauman Letter
