The 5 types of bulls you'll meet in 2021
Those hunting for bears - grizzly and investment expert alike - will be very much disappointed to find no such creature in their midst at the outset of 2021.
Instead, they'll find that fundies are grabbing markets by the horns, albeit some with a "cautiously optimistic" grip, adamant that our local bourse can - and will - hit an "all-time high" over the coming 12 months.
This is, if not a surprise, then notable. After all, investing legend and GMO co-founder Jeremy Grantham warned in these very pages that we are currently witnessing "one of the great bubbles of financial history"; one that will eventually burst - no matter how much stimulus the Fed tries to throw at it.
Nevertheless, here is your harem of bulls, with some recommending a stock-by-stock lens and others predicting a returns deluge in 2021.
- Ben Clark, TMS Capital
- David Allingham, Eley Griffiths Group
- Vihari Ross, Magellan
- Kelli Meagher, Sage Capital
- Chris Demasi, Montaka Global Investments
- Julia Weng, Paradice Investment Management
- Matthew Booker, Spheria Asset Management
- Olivia Salmon, Lennox Capital
- Dr Bianca Ogden, Platinum Asset Management
- Matthew Kidman, Centennial Asset Management
You can watch the video by clicking the player below. Enjoy!
NB This video was filmed on December 15 and 16, 2020.
1. Where's the beef? A stock-picker's market
Magellan's Vihari Ross believes there is an opportunity to find value in the market, you just have to pick the winners from their overvalued peers.
"Ultimately I think it really needs to be a stock-by-stock call," she says.
"Some stocks are overpriced and some stocks are showing value on a long-term basis."
While some may be wary of stocks at awe-inducing highs, Ross argues that there are companies that have legitimately benefited from pandemic-related changes, with their business fundamentals permanently improved in COVID's wake.
Platinum Asset Management's Dr Bianca Ogden also believes investors need to be selective over the year ahead.
"Some areas have done really, really well, so you should probably be cautious there," she says.
"But overall, it's always about looking at what companies you want to invest in and being selective."
2. The value of Value
While Ross and Ogden are bullish on a stock-by-stock basis, Paradice Investment Management's Julia Weng believes investors would be well served by cornering value stocks in the market as we head into the new year.
"We've seen a raft of positive vaccine news, we've had good health outcomes here in Australia and you've got unprecedented monetary and fiscal stimulus, so that should help improve the earnings of cyclical companies," she says.
She points to financials and materials as being key sectors to benefit from this environment.
"What we can't say is how the other side will behave, so your tech stocks or your rate-sensitive stocks that had the benefit of lower rates, but not necessarily earnings uplift," Weng says.
3. A smorgasbord in small-caps
Similarly, Spheria Asset Management's Matthew Booker believes there to be opportunity within the small-cap and micro-cap arena, despite typically being quite conservative.
"There's heaps of opportunity; we're talking a smorgasbord in small-cap and micro-cap at the moment, so we're finding a lot of opportunities out there," he says.
"You're seeing M&A activity, you're seeing all the constructs of actually making good money in small-caps over the next couple of years.
"There is some over-hype and there is some bubble activity, particularly in tech, but there are other sectors where there's heaps of valuation support."
Lennox Capital's Olivia Salmon also is bullish on small-caps for 2021.
"We've had a lot of government stimulus in the pipes, we've got an ultra-low interest rate environment and... when borders open up and restrictions ease off that pent up consumer demand coming through," she says.
"Online retailers and furniture retailers have had a great run, but I think there's still some pent up demand to go."
4. The Holy Trifecta: Stimulus, low rates and the end of Trump's tyranny
While Montaka Global Investments' Chris Demasi noted that he wouldn't typically make market calls, he believes there to be an abundance of reasons for global markets to rise over the year ahead.
"We're seeing vaccines for the virus being administered as recently as today, we know that economies around the world aren't going into massive shutdowns anymore, there are trillions of dollars of fiscal stimulus being pumped into the economies around the world, central banks are expanding their balance sheet and committing to low-interest rates for the foreseeable future," he says.
"These are all great things for stocks and the "Aggravator in Chief" is out-of-office starting next year as well, so things are a little bit more benign on that front."
Sage Capital's Kelli Meagher is also a bull and offers two reasons for her optimistic outlook: low-interest rates and economic recovery.
"We're going to have low-interest rates for quite a long time and that's supportive for valuations," she explains.
"And economic recovery - who would have thought that we would rebound from a global pandemic here in Australia, particularly the way we have. All of the economic indicators are at multi-year highs or are certainly very strongly recovering."
This combination of low-interest rates and strong business and consumer confidence "is a really good indicator for strong earnings growth" in 2021, Meagher says.
"The equity market may end up not quite as high as earnings growth, but I still think there's plenty of upside."
Similarly, TMS Capital's Ben Clark is also bullish on equities in 2021, and believes the ASX will hit an "all-time high" at some stage during the year.
"I think you're going to see quite strong earnings per share growth right across the market, which has been something that's been missing for years in Australia now," he says.
"I think you're going to see a surge in consumer confidence, there's still a lot of stimulus to flow through and I think there's a lot of cash that's still looking for a home."
Eley Griffiths Group's David Allingham also believes markets are set for another bullish year.
"I think 2021 is going to be an up market for investors," he says.
While he believes investors made money by being contrarian in 2020, he argues investing with consensus will serve investors better in 2021.
"I think in that sense the Australian market particularly is very well primed for a strong year; banks and resources chiming together, the Aussie dollar going to 85 cents, international money flowing into our equity market," Allingham says.
"Australia is set for a good year."
5. The wary bull
To Centennial Asset Management's Matthew Kidman, the lack of bears in the market should serve as a stark warning.
"I'd like to be a really strong bull, but the problem that's happened over the last, I'd say two to three months and it accelerated with the vaccines, is that there's not a bear in the market," he says. "So that gives you a red flag."
Nevertheless, he admits he is also bullish thanks to his love of recoveries.
"Recoveries are terrific for companies because their margins expand, their costs don't come back on, but the demand picks up," he says.
"So we'll get a lot of earnings growth this year, interest rates are low."
However, he warns that investors should carefully track a rising dollar.
"It's on a trend and the trend lasts for years, so I think overseas earners, as they have done over the last two or three months, might underperform," Kidman says.
"You want to be in the domestic market with companies exposed . I think we can get 14 to 15% return this year."
All that aside, if 2020 taught us anything it is that market predictions can be quite futile. Who could have foreseen the chaos that would arise at the precipice of the new decade, other than, of course, any virologist or the producers of 2011 film Contagion. Similarly, who could guess the path markets would take in the pandemic's wake.
With this in mind, we really recommend you take a read of Jeremy Grantham's unequivocally bearish piece "Waiting for the last dance" for a slightly different perspective on equities for the year ahead.
Are you feeling bullish or bearish in 2021?
How are you feeling about markets for the year ahead? Look into your crystal ball and tell us in the comments section below.
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Ally Selby is a content editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your...