At the end of 2020, the global equities market is coming to a close with a solid performance for most of the year. Despite the economic uncertainty due to the COVID-19 pandemic, the S&P 500 has advanced 13.6% year-to-date, the Dow Jones Industrial Average edged 9.5% higher and the NASDAQ Composite gained 37.4%.
As the fourth quarter draws to a close, analysts and investors have begun to look ahead to 2021 and ask: What’s next for the markets?
One of the defining themes of 2020 will be the increased role of technology, and many expect this trend to continue into 2021. Technology and tech-adjacent stocks have been the biggest drivers of the equity markets throughout the year, and this is unlikely to change.
The high-growth technology sector could see further acceleration as companies continue to make investments in digital transformation and develop more innovative products. This could especially be the case if there is a shift in consumer preferences towards digital goods and services.
In addition, many investors believe that growth stocks could continue to outperform in 2021. Growth stocks are those that have higher-than- average growth prospects, and as investors look to capitalize on long-term investment opportunities, these stocks may remain popular.
Meanwhile, value stocks, such as those in the energy and financials sectors, could continue to suffer as these markets remain under pressure. Stocks in these industries have struggled as demand for their services has declined.
It’s also worth noting that news from Washington, D.C. could have an effect on the markets in 2021. Whether it’s U.S.-China trade issues, the roll-out of a vaccine, or other stimulus, the news could lead to a more unpredictable trading environment.
Finally, as the world’s economic activity slowly recovers, inflation could become an issue. This could impact the markets as investors seek to protect their portfolios from rising prices.
As 2021 unfolds, markets are likely to remain volatile, and continued economic uncertainty will remain a challenge. However, for those with a long-term investment plan, the market could provide some attractive opportunities. Technology companies, growth stocks, and inflation-proof investments may remain some of the key themes in the months ahead.