Welcome to the new year, folks. Hopefully itâ€™s a better one than last year. Indeed, if you read the previous Hypergrowth Investing issue on Wednesday, then you know that I am abundantly optimistic about what 2021 has to bring.
As a country, our brightest eras have consistently been preceded by our darkest eras.
The Roaring Twenties was preceded by World War I and the Spanish Flu. The Golden Age of Capitalism in the 1950s was preceded by World War II. The 1980s global economic expansion was preceded by a decade of crippling stagflation.
Oftentimes, we find that crisis first scares people, then frustrates them, and then brings them together. Crisis is the impetus for humans to get uncomfortable, which sparks them to change, which sparks them to progress, and which ultimately helps them create a better tomorrow.
After all, as the old saying goesâ€¦ itâ€™s often darkest just before dawn.
Andâ€¦ as another old saying goesâ€¦ history often repeats itself.
History will repeat itself over the next decade.
2020 was arguably one of the darkest eras in U.S. history. A global pandemic shut down the entire economy, kept families from seeing one another, and claimed hundreds of thousands of lives, while the country became about as divided as ever over sociopolitical issues.
It wasnâ€™t a pretty year.
But in its wake, society has an opportunity to create a better tomorrowâ€¦ and thatâ€™s exactly what we will do, because it is what we have done, time and time again, since the dawn of man.
This time will be slightly different, thoughâ€¦
Because history will repeat itself at the exact same time that multiple breakthrough technologies like AI, self-driving, clean energy, and gene editing are rapidly turning into disruptive realities.
The convergence of these two things will create a decade of hypergrowth like weâ€™ve never seen before.
As I said in the last issue, the 2020s will be one of the best decades ever for society, for culture, for the economy, and for the stock market.
Naturally, Iâ€™m bullish.
But now to more pressing issuesâ€¦
Letâ€™s talk about this year â€“ about 2021. Whatâ€™s going to happen to the stock market? Where should you put your money? What are the best opportunities in the market?
To answer those questions, letâ€™s take a look at my three â€œBig Pictureâ€ predictions for the stock market in 2021:
The S&P 500 Will Rise By at Least 10% in 2021
The market has staged an incredible rally from its March 2020 lows, rising about 70%. After such a rally, one may reasonably believe that a breather is in-store. But if you look back to 2009, the S&P 500 also rose about 70% from its March lows to year-endâ€¦ and then rallied another 13% in 2010.
With Covid-19 vaccines being administered, interest rates at zero, and post-war euphoria waiting to be unleashed, the S&P 500 has the necessary ingredients to keep pushing higher. My 2021 price target for the index is 4,200 â€“ representing about 13% upside potential over the next 12 months.
Growth Stocks Will Outperform Value Stocks in a Big Way
As we covered in an issue last month, growth stocks have outperformed value stocks in 9 of the last 10 years, mostly because interest rates have been stubbornly low, and in a low-interest-rate environment, growth stocks perpetually outperform.
Throughout 2021, interest rates wonâ€™t just be low. Theyâ€™ll be stuck at zero. And they will likely be stuck at zero for the next three years. With that outlook, investors will push off â€œrates are going higherâ€ worries, and continue to pile into next-generation growth stocks.
Small-Cap Growth Stocks Will Be the Biggest Winnersâ€¦ By a Mile
Not only will growth stocks outperform in 2021, but small-cap stocks will outperform, too. Thatâ€™s due to a combination of small businesses having more severe exposure to Covid-19 (and therefore being more levered to a Covid-19 recovery), as well as the historical data point that small-cap stocks tend to outperform large-cap stocks in post-election years by about 4%.
Thus, the marketâ€™s biggest winners in 2021 will be stocks that live in the overlap of â€œsmall capâ€ and â€œgrowth.â€ Many of these stocks could easily rally 20%, 30%, or more over the next 12 months.
In other words, the market is going to have a good 2021, growth stocks are going to have a great 2021, and small growth stocks are going to have a superb 2021.
Thatâ€™s bullish for us, because at Hypergrowth Investing, we focus on the last two groups.
We focus on companies that are disrupting the status quo, and on companies that are leveraging breakthrough technologies to help a define a smarter, healthier, cleaner, more efficient, and better tomorrow.
Those companies are positioned for a decade of hypergrowth ahead â€“ and 2021 will be a banner year that will kickstart the party.
Soâ€¦ sit down. Buckle in. And letâ€™s enjoy this hypergrowth ride to hyper-big profits.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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