We were all so happy to get out of 2020, we didn't realize that we stepped out of one crazy cab and into a train wreck! Can't we have a slow news cycle for 1 month?
With a strong stock market that threw many for surprise in 2020, we think people are underestimating the return potential in 2021. Look how bad the news cycle has been on a political front, botched vaccine roll out, increases in lock down measures, and so on, yet the market shrugs it all off. In fact, technology, small cap stocks, and emerging market stocks had a great start to the year (coincidentally our tactical investments).
We now hear a lot of concern over bubbles and valuation. We appreciate these concerns, and using traditional metrics, it is hard not to have that concern.
However, as we discussed in our webinar, we live in a digital age, and we are just entering a phase of exploring the real potential to what that means.
In particular, we would point to a few things that are difficult to measure in a digital age and with significant innovation:
1) inflation: the impact is lower prices, but not because of lower demand. As we use resources more intelligently, become more informed and smarter consumers (both individuals and corporations), and find better and cheaper ways to solve problems, prices go down.
2) GDP: usually measured by consumption, GDP goes lower if prices go lower. If we consume the same amount year over year, but buy it at a 10% discount, then gdp would fall 10%. GDP is still measured using industrial age metrics, but in the age of innovation and digital solutions, some aspects of economic growth and prosperity may go undetected.
Overall, there are a lot of things on motion today, and with a strong economic backdrop, enthusiasm over fiscal and monetary policy, and record earnings, we think it is best to remain focused on well thought out goals and objectives and to not get caught up in GameStop excitement.