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Themes to Watch in 2021 – Mish Schneider

Themes to Watch in 2021 – Mish Schneider

This is the second of three articles on the outlook for 2021. 

In the first article I focused on Raymond Lo (Feng Shui Master), the Year of the Metal Ox and the potential for both more disaster and better times, depending upon where one looks.

Moving from astrology, with the Dow now over 30,000 (give or take), we have a good pivotal number to watch as 2021 begins. 

The rotation into the iShares Russell 2000 [IWM] should continue and a dip or correction, especially if it gets closer to $170, would be welcomed. Along with IWM, Retail and Transportation are two sectors that we will also look to buy on a correction.

Additionally, there are several themes or trends we are looking at in the coming year, in no particular order.

Although a bottoming pattern is in place for the ETFMG Alternative Harvest ETF [MJ], the cannabis theme has a lot of work it can do. We are looking for a weekly close over $16 that should take the MJ up in the low $20s for starters.

If $1800 holds for gold, we need to clear $1900 and through there, we can see a return to $2000 or higher. A lot depends on the dollar, interest rates and whether any geopolitical strife emerges from Iran, Russia, China, or North Korea.

Geopolitical strife will put oil in focus too, as that could surprise to the upside. $50 a barrel is a pivotal price point. 

Other areas to watch should geopolitics heat up are Lockheed Martin [LMT], General Dynamics [GD] and Kratos Defense & Security Solutions [KTOS]

Speaking of commodities, the food sector should continue to be a buy on the futures exchange or through ETFs. With shortages, a lack of new production, low labour force, La Nina and return of global demand, the Invesco DB Agriculture Fund [DBA] around $15.00 is a good area to buy.

We are also very bullish on wheat, corn, soybeans, sugar and coffee. 

In fact, we are more bullish here than in any other instruments for 2021 — at least through the spring-summer period. 

Water futures are beginning on the Chicago Mercantile Exchange. The Invesco Water ETF [PHO] is on new all-time highs. Water processing and water transportation equipment could also present investors with opportunities. Water Technologies [WTS] is one that looks great. Itron [ITRI] and SJW Group [SJW] also look poised. In the water transportation sector, we like Brookfield Infrastructure Partners LP [BIP]. We have been tracking Scorpio Tankers [STNG] and Teekay Tankers [TNK] as well.  

We traded Bitcoin through the Grayscale Bitcoin Trust OTC instrument [GBTC]. With so many bullish going forward, a dip to $22.00 is a buy with a risk under $17. If bitcoin holds $19,000, it can see a move to $30,000-$35,000.

The dollar needs to be watched very carefully. In July 2020, the dollar broke from an 8-year uptrend. Should it continue to fall into 2021, especially with increased stimulus, it could spark the inflationary theme. The dollar is heavily shorted. A good rally would be a better sell opportunity now, rather than selling the current weakness.

The Federal Reserve’s playground, high grade bonds and junk bonds also need to be watched with the new administration. Junk bonds [JNK] under $107 would suggest harder times for the overall market. Furthermore, long bond interest rate yields have risen in the last month. A reversal in that trend would represent another key to a potential overall market correction. 

Circling back to Raymond Lo, we looked at the insurance sector. The Travelers Companies Inc. [TRV] is consolidating throughout December. Over $140, that could continue to rise. If United Health [UNH] holds over $320, it looks poised as well. CVS Health Group [CVS] and Allstate [ALL] are also interesting to watch. 

 

Look out for Part 3 of the 2021 Market Outlook. 

Have a very merry and happy Christmas!

 

 

Bio

Michele 'Mish' Schneider currently serves as Director of Trading Research and Education at MarketGauge.com. She writes and produces daily market analysis in "Mish's Daily", and serves as a developer and trading mentor in several of our trading services, drawing on her 30+ Years of Trading and Teaching Experience.

Mish is a former floor trader on several New York Commodity Exchanges, including Coffee, Sugar and Cocoa NYMEX and FINEX in NYC. While on the trading floor Mish also served as a market analyst for two of the largest commodity trading firms at the time - Continental Grain, and Conti-Commodities.

Mish also wrote the best-selling finance book, Plant Your Money Tree; A Guide To Growing Your Wealth.

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