Key predictions for the US stock market in 2021 (Part 2)
This article is the next part of the author's main predictions for the global financial market in 2021. Includes predictions 6 to 10:
6. The US dollar exchange rate depreciated slightly
Currently, institutional investors around the world agree on their expectations for the depreciation of the US dollar exchange rate. This situation can be seen from futures data on the US dollar exchange rate, etc. The author believes that once a consensus is reached in the market, it is difficult to actually happen, especially when it comes to the US dollar, which has the status of an international reserve currency. After this year's global recession, all countries are facing a devastated economy in need of recovery. If the US dollar exchange rate depreciates sharply, the economies of the Eurozone, Japan, and emerging countries around the world will all experience a double blow caused by the exchange rate. Currently, there are frequent negotiation mechanisms between central banks. If the dollar depreciates too much and too fast, it is likely that countries will directly or indirectly intervene in the foreign exchange market.
In addition to fundamental factors, the US dollar exchange rate also needs to reflect the geopolitical relationships of countries. Next year, the Democratic Party enters the White House, and Biden's policy tone is global cooperation. Under this premise, it is difficult to see the political will to depreciate the dollar drastically. In other words, if the dollar depreciates, all countries may lobby the White House to suggest maintaining a stable framework for the US dollar exchange rate.
7. The world's largest listed technology companies were split
One of the hottest topics during this year's US election was the monopoly position of technology companies. Although the stock prices of the five major US technology companies have recovered in recent months, the market positions of Google, Facebook, Apple, Microsoft, and Amazon have continued to rise. Looking at the history of the United States, one thing can be found: American society does not like monopoly companies. From the introduction of the Sherman Anti-Monopoly Law until now, the United States has successfully dismantled Rockefeller's Standard Oil Company, disbanded the American Telephone and Telegraph Company, etc. through government lawsuits, congressional legislation, etc. Monopolies also have a significant negative impact on economic innovation and development. During the US election, social networking platforms for many technology companies became the main media tool, triggering strong public disgust. The Biden team's financial plans for the US next year also include plans to prevent technology companies from using loopholes in tax laws to achieve zero tax rates and conduct antitrust investigations. In addition to the US federal government, attorneys general in many US states have begun investigating the monopoly issues of technology companies, and the European Union has also begun to have antitrust concerns about large US technology companies.
For the monopoly behavior of very large enterprises, large fines can be used to guide them to voluntarily split up business divisions and assets. National Assembly legislation or administrative lawsuits can also be passed to force the division of business subsidiaries to create competition. Of course, splitting up a business is not a bad thing for investors. Under normal circumstances, the total value of shareholders' equity will rise after the split. It is worth mentioning that antitrust issues are not limited to the US; other countries, including China, may carry out anti-monopoly acts in 2021 to promote fair competition in the market.
8. Major development of the healthcare industry
The coronavirus outbreak has revealed a number of problems in the global healthcare industry over the past few decades. The author has been involved in investing in the US healthcare sector for a long time, and can be said to have seen many problems. This includes excessive medical treatment, including games between medical institutions and health insurance institutions, as well as games between large medical centers and specialist diagnosis and treatment institutions. In fact, starting in 2018, the United States has seen a clear trend of continuous decline in regional comprehensive medical centers, and continuous development and expansion of specialty medical care, surgical centers, etc. The COVID-19 outbreak has actually accelerated the concentration of patients in specialist hospitals. For example, patients requiring surgery do not want to go to a comprehensive medical center; they are likely to be infected with other viruses; they prefer to go to an independent surgical center and be physically isolated from other patients.
Even at home, I believe there is a similar trend, that is, patients are gradually abandoning their blind worship of the “top three general hospitals” and starting to choose more specialized medical institutions. The development of the epidemic has also enabled more patients to obtain medical services through telemedicine in response to traffic disruptions. Finally, the rapid development of big data over the past few years has also begun to enter the healthcare industry. Many image-based diagnosis and treatment decisions will increasingly use artificial intelligence to improve efficiency and quality. The author currently serves as the management of a NASDAQ-listed healthcare merger and acquisition company, and is deeply involved in mergers and acquisitions in the healthcare industry in the Asia-Pacific region. According to our observations, a large number of healthcare institutions will be merged and acquired next year, and online medical care and artificial intelligence diagnosis and treatment will be upgraded. Meanwhile, the intervention of large technology companies including Google, Amazon, and Apple, and large medical insurance companies such as Antai and UnitedHealth will completely disrupt the traditional medical service model. Even large supermarket chains such as Walmart and CVS will boost their market share in the healthcare sector and provide some traditional hospital services.
9. Financial, economic and trade relations between China and the US are warming up
The economic and trade relations between China and the US have had many ups and downs in the past few years, but the author believes that next year will be a year of warming up in Sino-US economic and trade relations. Among them are not only the reasons why Biden paid more attention to international cooperation after entering the White House, but also the trend of China's financial market opening up at an accelerated pace. Since the second half of this year, many of Wall Street's leading buyer asset management companies, seller investment banks, and commercial banks have obtained relevant domestic financial business licenses for the first time. Currently, China's financial market is huge, and it is entirely possible to try to be more open to foreign-funded financial institutions. Including Vanguard Asset Management's move of its Asia Pacific headquarters from Hong Kong to Shanghai, the plan to further cultivate the Chinese market is a very representative event. These financial institutions all have very long-term strategic plans. Currently, they are still recruiting troops and gradually expanding their domestic teams. I believe many of them will substantially launch some products next year, bringing many of Wall Street's zero-rate or extremely low-rate products and service models to China. Ultimately, these financial innovations will help the domestic financial market mature, help domestic institutional investors and retail investors get better services, and reduce financial costs.
There are two very different voices about Chinese securities listed in the US this year. The media portrayed a lot of news such as “China Stock Market Delisting.” Meanwhile, the Chinese securities sector actually achieved two record highs in terms of financing scale and returns on Wall Street. Investors and shareholders have reaped extremely generous returns in the US stock market, including the three major domestic electric vehicles. The author believes that China Securities will continue the “big wave” process next year. High-quality Chinese securities will continue to be the core asset allocation target for US institutional investors after overcoming problems such as connecting with some accounting standards. A large number of emerging Chinese securities companies will continue to ring the bell listing on the New York Stock Exchange and NASDAQ Exchange. Of course, with the strengthening of regulations in China and the US, it is also possible to expect that some fraudulent Chinese securities companies will be quickly delisted.
10. Sustainability (ESG investment) has become the core theme of the global financial market
If the COVID-19 pandemic is the main cause of the global economy entering recession this year, the negative impact of severe climate change on the global economy has been overshadowed. In fact, the impact of this year's California wildfires and the corresponding severe droughts on the US economy cannot be underestimated. And the impact of the ongoing destructive development of the Amazon rainforest on global climate change cannot be ignored. I have seen an analysis that says that the spread of the coronavirus this year and severe environmental pollution have led to serious respiratory diseases among residents in many places, and there is a great relationship between the decline in resistance. From governments, to civil society organizations, to financial institutions, they are reflecting on this year's epidemic and considering how to achieve sustainable development in the future?
The author anticipates that next year, investments based on environmental, social and governance (ESG) standards will become a core theme for institutional and high-net-worth client investments. What are environmental, social, and governance (ESG) standards? ESG standards are a set of company operating standards that are used by socially conscious investors to screen potential investments. Environmental standards consider a company's performance as a natural steward. Social standards examine how it manages relationships with employees, suppliers, customers, and the communities in which it operates. Governance involves the company's leadership, executive compensation, auditing, internal control, and shareholder rights. The “social value investment” proposed by Howard Buffett, the grandson of Mr. Buffett, also reflects this idea. Investments to achieve ESG include not only saving energy, reducing excessive consumption, and increasing investment in new energy sources, but also increasing the quality of social development and making the corporate governance structure more shared by management, shareholders, employees, and customers.
In summary, the author is relatively optimistic about the overall investment opportunities in 2021, and is particularly confident that the technology, healthcare, and new energy sectors will continue to grow. However, the negative impact of COVID-19 on the global economy cannot be underestimated. Next year should be a year for countries to cooperate to achieve gradual economic transformation and recovery. As Blackstone's Schwartzman (Schwartzman) said, every economic crisis or recession is a time to find the best investment opportunities. The author believes that after this year's pandemic and major impact, restarting the economy and achieving innovation and development next year will bring unprecedented opportunities to investors!
