"Here’s What’s Coming in 2021"
by Brian Maher
"The calendar has scrolled to 2021, mercifully. The plague year has ended. As a financial newsletter, we are duty-bound to give our annual market forecast - such as it is. So today we fetch our crystal ball from storage… blow away the dust... and gaze for images of the year ahead. How long will the virus menace us? Will the economy continue its recovery? Where will the stock market end the year? Gold? Bitcoin? The answers - the guaranteed answers - anon. But before we glimpse how markets will end 2021, let us glimpse how they began 2021… If today is a preview, the stock market is in for heavy weather this year.
Stocks Open 2021 in the Red: The Dow Jones shed 382 points. The S&P gave back 55; the Nasdaq, 189 points of its own. Gold, meantime, had itself a day at the races... up a rollicking $51.50 in all. Bitcoin presently goes at $31,083 - plenty handsome considering it was under $20,000 three weeks prior - but not as handsome as yesterday’s $34,339.
What strange, occult forces frightened the horses today? CNBC offers its diagnosis: "Data compiled by Johns Hopkins University showed more than 20 million Covid-19 infections have been confirmed in the U.S. Several cases of a new coronavirus strain have also been confirmed across the country. Globally, more than 85 million cases have been confirmed."
Just so. Yet infections have been on the jump for months. Stocks nonetheless posted record highs to close the year. Why the sudden jolt? And are markets not aware of the vaccines? Here CNBC fishes up another clue - in our estimate, a stronger clue: "Wall Street is also keeping an eye on Georgia as the state prepared for a Senate runoff election on Tuesday, which could give Democrats a majority in the chamber."
A Blue Wave? Online betting market Predictit presently places the odds of a Democratic sweep near 50%. Last Thursday those same odds came in at 35%. That is, the odds of a “blue wave” have surged within the space of days. The joker card is in play. And so the stock market is off-guard ahead of tomorrow’s runoff election… off-balance… off-center.
But we are not concerned with the transient shakes and fevers of the stock market. Its daily moods fail to fluster us. They entertain us, it is true… as a circus or a joust might entertain us. But they do not fascinate us. It is the longer view that seizes our interest.
Does the House of Cards Come Down in 2021? Daily Reckoning contributor James Howard Kunstler has peered into his own crystal ball. It is filled with horrific scenes, dismal premonitions of 2021. Dow 10,000? Nasdaq 3,000? S&P 550? A 40% GDP plunge? A return of the black plague? These and other ghoulish visions parade before his disbelieving eyes:
• The stock market will enter long, deep asset value deflation through first and second quarters and bottom-bounce the rest of the year. S & P falls to 550 range; DJI under 10,000; Nasdaq under 3000...
• U.S. GDP down by 40-percent year-end 2021.
• U.S. oil production (minus natural gas liquids) will be down by 40-percent, year-end 2021.
• The banking system will be thrown into disarray due to the non-payment of rents and mortgages. The federal government will intervene with direct renter relief payments. Homeowners in default will be allowed to remain in their houses on a provisional basis (which is never reconciled).
• A bubonic plague outbreak will spread among the homeless of Los Angeles as rats proliferate in their encampments.
• Pension funds collapse as the broken chain of rent-and-mortgage payments destroys Real Estate Investment Trusts.
• The Federal government will be forced to organize massive food giveaway programs.
• General Motors, Chrysler, and Ford will once again seek bankruptcy protection. This time, their assets will be sold and reorganized into smaller companies. No bailouts.
• Covid virus fades from the scene by the 3rd quarter, but economic carnage remains. A huge amount of restaurant equipment will be sold for dimes on the dollar.
• Bitcoin “Hodlers” will become Bitcoin “Sodlers” as cryptos tank.
How many of James’ projections will manifest this year? All of them? None of them? Two of them?
Two Scenarios: Another Daily Reckoning contributor - Charles Hugh Smith - divines no specific 2021 events. He merely holds out two scenarios. The one scenario is hopeful. The second is not hopeful. Yet even the most hopeful outcome is dire, grim. Here Charles sketches the scene in very dark colors: "The most hopeful scenario for 2021 is that the obsolete, inefficient, ineffective and sclerotic sectors and agencies, no matter how sacrosanct, collapse or downsize quickly. This drastically reduces the cost and pain to levels that the economy as a whole can absorb.
The worst-case scenario is our weak and/or corrupt government and central bank keep all the doomed zombies on life support, a process that bleeds the economy of adaptability, flexibility, innovation and resilience. The path of least resistance, the politically expedient path - over-borrowing and devaluing the currency by over-issuing "money" - leads to decay and collapse. There is no other possible result, no other possible outcome."
We have little doubt about which outcome officials will pursue. It is not the most hopeful scenario… incidentally. So now we come to our own tub-thumping predictions for 2021 - predictions guaranteed to knock you to the floor…
Three Stunning Predictions:
Prediction No. 1: In 2021 the stock market will rise. Or fall. Or - or - it will end the year precisely where it began.
Prediction No. 2: Bitcoin, gold, oil, United States Treasury notes and all remaining assets will rise, fall... or hold steady.
Prediction No. 3: The economy will expand in 2021 - unless it contracts. Bear in mind: the economy may do neither. There you are - three thundering predictions for 2021.
And fortune favors the bold.
Sure Bets: But you say you are dissatisfied with our cowardly refusal to hazard a guess? You want specific predictions? Then specific predictions you will have...
The virus will cease to be a menace by summer. The economy will expand 2.3% this year. The budget deficit will come in at $2.41 trillion. Interest rates will remain at zero. The Federal Reserve’s balance sheet will near $9.77 trillion. The Dow Jones will close the year at 28,617. Gold will close the year at $3,893.51. Bitcoin will close 2021 at $47,588.26.
There is 2021 for you - down to the last jot, down to the last tittle - down to the last decimal point. We advise you to invest accordingly. Of course, The Daily Reckoning is a free publication. We charge nothing for the advice posted above. And this you must admit: At least you are receiving the advice you pay for…"
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