Predictions 2021

It’s an end-of-year tradition here at Angel Publishing to dust off the ol’ crystal ball and offer up some predictions for the coming year. 

Of course, we all put a lot of thought into our trend analysis. That’s why my Wealth Advisory subscribers were holding Teladoc (NYSE: TDOC) and Chewy (NYSE: CHWY) when the pandemic hit. 

We weren’t prepping for lockdown (I’m good, but not that good). These investments were part of the migration to the cloud trend that has been cooking for a decade.

Still, it should go without saying that these end-of-year-prediction articles are mostly just for entertainment. Sometimes, we are eerily prescient. A few years back I missed the high for the S&P 500 by seven points. 

But we all know that things change fast in the stock market. You gotta be flexible when it comes to forecasts. 

And then, every so often, we get a year like 2020, where everything goes completely haywire. 

We have a summer tradition at Angel, too. We usually check in with our predictions and see how they’re doing. This year, I thought, Why bother? What purpose would it serve to review forecasts that didn’t include a global pandemic, a historic market sell-off, incredible Fed actions, an unemployment rate three times higher than what we saw in the financial crisis, oil trading in negative numbers…

I finally decided to check out what I wrote last year. It was… interesting. 

The article started like this:

Every year has its own special weirdness. 2019 was no exception.

Weird? 2019 was weird?? Looking back, I think it’s fair to say that 2019 didn’t have diddley on 2020. 

In any event, I figured with that start, probably wasn’t gonna get any better. I’m not gonna go point by point because that’s just silly. But I will share some highlights…

Cherry-Picking Highlights

My first prediction is always about the performance of the S&P 500. Last year, I wrote:

The companies of the S&P 500 should earn around $180 a share in 2020. That’s a nice bump from the ~$163 per share for 2019. If we apply a P/E of 20 for 2020 earnings, we get… 3,600. 

And, you never go wrong being bearish on oil: Strangely enough, energy companies are expected to post the biggest year-over-year earnings growth in 2020. Crazy, right? In fact, I do think that’s crazy. 

This one’s pretty good:

2020 will be the year that the EV transition starts to hurt auto companies.

And I’ll cherry-pick one more:

Look for a big jump in [Disney+] subscribers and a sale. Disney (one of my faves) will rally on an ESPN sale. In fact, I think 2020 is the year that DIS becomes a “must-have” stock, if it’s not already. 

Now, these forecasts might sound fairly accurate. And I suppose if COVID never happened, I could even brag a little. But in the stock market, as with so many other things, the journey matters. Destinations are all well and good, but just think about what it took to get there.

I’ll tell you something else. I advised my Wealth Advisory subscribers to sell Disney at $121 a share back in May. Why? Well, I came into 2020 wildly bullish on Disney. Analysts’ estimates for Disney+ subscriber growth were way too low. 

However, Disney gets about half its revenue from its theme parks. No way was Disney going to make up for the lost revenue. And so Disney was one of just three stocks we sold in the early going of the pandemic. We also sold a REIT that leases space to movie theaters and restaurants, and we took a nice quick profit on a bounce for United Air. 

My editorial/research partner, Jason Williams, and I didn’t panic. We didn’t gut the portfolio. Oh, we had some long discussions, you can be sure. But in the end, betting on the long-term resilience of Americans and the ingenuity of our scientists, engineers, and inventors is usually a pretty good bet. 

Still, I wish we hadn’t sold Disney.

Prediction Time!

So if you can’t tell, I’m stalling. If I can get to a thousand words or so without actually making any kind of definite prediction, I am just fine with that. 

Because frankly, the prediction business is particularly tough this year. The only other time in the last 25 years that stocks were this expensive was in 2000, and we all know what happened then.

And the consensus opinion of money managers is kinda crazy right now. I hear them say, “Sure, fundamentals are really out of whack right now. But the Fed will keep rates low and keep buying bonds, so stocks will be fine for another couple of years.” 

Really?

It’s not so much the valuations that bug me. They do bug me, but it’s not my biggest concern. What really worries me is sentiment, the basic assumption that there simply is no downside to stock prices. Everybody has piled into stocks so that if this market turns, it takes everything with it. You can throw all these predictions right out the window. 

So I guess what it comes down to is that I do not want to give anyone the wrong idea about the risk of this market. It could be 1998, and stocks could carry on for another couple of years… or it could be 2000 and the endgame is dead ahead. 

I will still be buying stocks (and taking profits where appropriate). And I will still be recommending stocks to my readers. But I won’t be sugarcoating the risk to anyone.

Now lemme see… oh, 905 words. That’s close enough! Tune in this coming Monday, January 4, and I’ll lay out my basic gameplan for 2021. 

I hope you have as good a New Year as it’s possible to have right now.

Until next time,

Briton Ryle

@BritonRyle on Twitter

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.