Livewire reader predictions: How're you doing after 3 months?

Patrick Poke

Livewire Markets

Believe it or not, the first quarter of 2021 has already come to a close. While (thankfully) it’s been a much less eventful one than Q1 of 2020, it’s still brought its fair share of surprises. From the violent uprising in the American capitol in January to the Ever Given blocking the Suez Canal for several days in March, and of course the beginnings of a correction in tech stocks, nobody could accuse this quarter of being boring.

Regular readers may remember that in December last year, we asked you for predictions about several key situations in markets and the wider world, along with your top Australian and global stock picks for 2021. The first update on the stock picks is coming shortly, but in the meantime, here’s how your predictions are tracking.

Question 1 – Bullish or Bearish?

Livewire readers were unabashedly bullish coming into 2021 following the clear-out we experienced last year, and seemingly with good reason too. The bulls outnumbered the bears nearly four-to-one, and that optimism has paid off thus far, with the MSCI World, S&P 500, and ASX 200 returning 4.5%, 5.8%, and 3.1% respectively for the first quarter.

Call: Correct (so far)

Question 2 – The Aussie Dollar

Currencies are notoriously hard to predict, and thus far, they appear to be living up to their reputation. Despite the clear confidence Livewire readers had in the strength of the currency, it’s done nothing of note to date. To be precise, the AUD is down 0.57% year to date, which for all intents and purposes, is flat.

Call: Incorrect (so far)

Question 3 – Long term bonds

With bond yields rising from 0.978% to 1.83% - a rise of 85 basis points, almost a doubling, this is by far the clearest outcome we have so far. Interestingly, though, short term rates have not budged. This has created a very steep yield curve, meaning investors are being well compensated for taking on duration. Thankfully yields have stabilised around this level for now, but a further increase in long term bond yields could cause more havoc for tech stocks.

Call: Incorrect (so far)

Question 4 – Value versus growth

This was probably the hardest one to get a measure on, but consistent with the popular narrative, it appears ‘value’ stocks are indeed outperforming ‘growth’ stocks in 2021. To get a gauge on this, I took an equal-weighted sample of the top ‘value’ stocks, such as the Big Four Banks, Telstra, and the miners, and compared them against an equal-weighted sample of the top ‘growth’ stocks, such as Afterpay, Xero, and CSL. The results were stark. The ‘value’ basket produced a positive return of 11% during Q1, while the ‘growth’ basket lost 2.4% - and that’s before accounting for the higher dividends produced by ‘value’ stocks. For now, at least, the value investors are firmly in control.

Call: Correct (so far)

Question 5 – Afterpay

With Afterpay down nearly 14% in the quarter, it’s at no risk of cracking the top 10 at the moment. It’s currently the 15th largest ASX stock by market cap, with a capitalisation of around $30 billion. Woolworths is currently sitting in the 10th spot, with a value of around $52 billion. Afterpay has got some catching up to do if it wants to reach the top 10 by Christmas.

Call: Correct (so far)

Question 6 – Housing

Chalk this one up to the bulls. The audience was overwhelmingly bullish, and with good reason. Housing has taken off this year, with returns in recent months consistent with 20% annualised price gains. According to the Corelogic House Price Index, both Sydney and Melbourne exceeded 5% gains in the first quarter alone!

Call: Correct

Question 7 – International travel

This one remains uncertain, and likely will do for a while yet. While the vaccine rollout is promising, particularly in the US, UK, and Israel, political will for open borders seems weak. Even countries that have the virus under control seem reluctant to allow travel bubbles, with borders snapping shut at the first sign of trouble. Will the much-talked-about vaccine passport become a reality? Will scaremongering about ‘variants of concern’ prove more than just media noise? Or will fear of the virus overpower the will to travel? Only time will tell.

Call: Too soon to call

That concludes the update on the readers’ predictions for 2021, but there are more updates to come. Follow Ally Selby to hear how readers’ most-tipped small caps have fared so far, or follow me for an update on the Aussie large caps. Glenn Freeman will bring you an update on the readers’ most-tipped global stocks, while Mia Kwok will wrap it all up with some fresh views on the fundies’ top stocks for 2021.

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2 contributors mentioned

Patrick Poke
Managing Editor
Livewire Markets

Patrick was one of Livewire’s first employees, joining in 2015 after nearly a decade working in insurance, superannuation, and retail banking. He is passionate about investing, with a particular interest in Australian small-caps.

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