INVESTING WITH CLARITY® BLOG
TOP 20 Stock Market Predictions for the Roaring 2020s
January 1, 2021 8:00:00 AM
Yes, it is that time of year again, time for our Nepsis Top 10 Predictions for the Stock Market in 2021!
To stay on track with our historical performance (and we all know past performance is NOT indicative of future performance!), we were once again 10 for 10, or statistically speaking, batting a thousand.
As we head into the next decade, the Roaring 2020s... (statistically speaking,decades actually begin on the first year!), we want to celebrate our perfect record and up the ante. So, we are adding 10 more predictions to make it an even Top 20 Predictions to kick off the Roaring 2020s.
You may be asking yourself, “Why does Nepsis do these annual predictions — especially these types of predictions?” The answer is simple. We live in a world that I believe has an Addiction to Prediction. We see investors continue to make big investment decisions and mistakes as they listen to countless predictions, compare their portfolio to benchmarks without understanding how they work, and compare their portfolios to other portfolios without understanding how the returns were achieved and with what level of risk it took to achieve the returns.
My hope is that our predictions can provide a level of clarity and common sense for investors that will enhance their investment process, remind them of the perpetual industry noise that inundates them daily, and put a smile on their faces.
We have been telling our clients for twenty-plus years to always expect a 30% correction at any time. Furthermore, when they occur we have told clients to look for us to be buying many businesses at deep discounts. And you know what? That is precisely what we did in March and continued to do so through 2020. While there was panic all around, we stuck to our discipline and took advantage of buying great businesses at tremendous prices! Where there is deep conviction coupled with a consistent process, one gains great clarity!
Everyone knows that there is no crystal ball, but people readily latch on to a silver bullet or quick fix solution instead of being disciplined with their investment strategy. Let’s face it, there are a lot of people that love hearing predictions and, unfortunately, I believe many people focus more on predictions than they do on what they own and why they own it.
So, in an effort to keep our streak going, I will once again be making my bold predictions for 2021 and toss in another ten for the Roaring 2020s.
As I mentioned earlier, do investors really pay attention to see how accurate the experts’ predictions are? No, of course not! Therefore, I am going to make it easy for you and let you know how we have fared in our predictions since we started providing them in 2012.
In the nine years that we’ve been making predictions, we’re 9 for 9! That’s right — we have been right on every single one! I realize that may be an absolute surprise for some; however, as you will see from the past predictions, we do not go very far out on a limb.
Instead, we look at what should be common sense combined with many of the ideas investors seem to focus their efforts on. When all is said and done, when you are investing OVER TIME, it should be the investment philosophy and strategy that provides you with the confidence to stick to the investment process. Portfolio returns are relative to the risk taken.
Additionally, as we tell our clients, you don’t make or lose money UNTIL investments are sold. Focus on the process and on achieving long-term goals, not on a short-term number.
Here are the Top 20 Predictions...
- Investors will continue to see the predictions on where the S&P 500 will end in 2021 (just like 2020) and will be misled, with the potential consequences of investors piling in on over- priced assets and missing out on great companies on sale.
- Investors will continue to see company stock prices, as well as the “stock market,” move up and down irrationally – as usual. Remember, you don’t invest in the “Stock Market,” you invest in businesses purchased through a “market.”
- Investors will continue to attempt to time the market and fail, as there are approximately $16 trillion* held in U.S. households waiting on the sidelines, thus missing one of the best years for stocks since the Great Recession.
- Investors will continue to focus on short-term or historical performance which will distract them from focusing on their Financial Plan and making intelligent long-term investment decisions.
- Investors will continue to allow their emotions to get the best of them and make investment decisions emotionally as opposed to fundamentally.
- Investors will continue to be scared by stock market volatility and in turn, create great buying opportunities — like always! Yes, we took advantage of this massive pandemic pullback and volatility!
- Investors will continue to focus on inaccurate portfolio comparisons, with benchmarks focusing on fees and short- term performance vs the investment process – a symptom of poor investment Clarity.
- Investors will continue to be over diversified in their portfolios and will not be properly asset-allocated, leaving their portfolios inefficient.
- Investors will continue to follow the headlines instead of the bottom line when making investment decisions. Just look at all of the 2020 headlines that predicted doom and peril!
- Investors will continue to have an unrealistic time horizon for their investments, focusing more on short-term pain vs long-term gain – the tragedy of a short-term thinker.
- Investors will continue to sell perfectly good companies at the first signs of volatility due to lack of knowledge and conviction in their portfolio holdings — another tragedy of a short-term thinker.
- Investors will continue to limit their potential to be successful by failing to leverage the power and flexibility of Strategic Cost Averaging®.
- Investors will continue to chase returns and be enticed by the stock-of-the-day, piling into positions without the benefit of having a Buy Discipline – or even knowing what the term means!
- Investors will continue to invest without the benefit of having a clear Sell Discipline, keeping companies in their portfolio when better ones are available on sale or selling perfectly good companies based on fear and emotion.
- Investors will continue to put the cart before the horse, believing investing progress can be consistently made without first establishing an investment process – Strategy Philosophy Flexibility Transparency®.
- Investors will continue to make poor investment decisions without recognizing that their behavioral biases are, in part, to blame — the plight of investing without clarity!
- Many investors will continue to invest without giving themselves the satisfaction and peace of mind that comes from having conviction in their investments – and that conviction comes from knowing what you own and why you own it.
- Investors will continue to struggle with financial planning by not asking themselves two simple questions, “Is my portfolio doing the best it can?” and “Am I on track to experience the future I envision?”
- Investors will invest on their own while also working with professionals who invest on their behalf. Unfortunately, they will do so without having an efficient investing tax strategy, such as tax loss harvesting — that’s like planning to leave money on the table in advance.
- Investors will continue to lose out on enjoying many of life’s blessings by worrying and fretting about their investments instead of gaining investment clarity and redirecting their attention on the many greater gifts – family, friends, health & happiness!
Happy Holidays, Happy New Years and God Bless! Invest with Clarity®! — Mark Pearson
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