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Back to Normal. What would you do?

In the early days of COVID pandemic, absolutely no one including myself had any ideas on how long it would last and how devastating and abnormal 2020 would be. Almost everyone was optimistic that it would be only few weeks or few months at best. Case in point is my own blog which I wrote on Apr 18 about "To Open, or Not To Open". I must acknowledge that it was too early (almost by one year) and premature. This week World is reminded of numerous articles of one year of Pandemic and at same time world is also looking forward to return to normalcy. Let's be clear - Pandemic is nowhere over. Millions of people are still getting infected and thousands of lives still getting lost...my empathy to all the families who had lost loved ones...At same time, there is good progress being made to bring normalcy back...let's look at some of the aspects to be optimistic about

Vaccines - My salute to all the scientists, companies and volunteers who participated in trials as well as the ones who are administering shots to millions of people around the world. As of now, over 300 million have been vaccinated one or two doses. Many countries including USA are making great progress. Kudos to Biden administration to reach 100 million vaccinations (one dose) in less than 2 months and setting goal of full vaccinations by end of May. With such progress, summer would start looking sunny again!

Fiscal and Monetary Policy - Here again USA has been leader in terms of aggressive interest rate policies (thanks to Powell and Fed) and even more aggressive stimulus.  New $1.9 trillion stimulus should help millions of families who really need help as well as economy. Policy-makers learned their lessons from financial crisis that doing too little is not good. At times, to come out of the deep economic hole, one has to overshoot when it comes to policies and this time both Fed and Congress/President(s) did right thing by not worrying about long-term deficits and helping families and economy

Citizens - after initial resistance most of the people around the world understood seriousness of Pandemic and really participated with mask-wearing, social distancing and volunteering. Everyone wants world to return to normal and these precautions would  help us get there faster

The optimism and sunny days started showing up in stock market late last year. 2021 would be a banner year for economy - some estimates are close to double-digit growth in first half for US economy (which would have been unheard of). Overall growth of US and world economy could be over 5% and US unemployment could fall below 5% in 2022 (nearly 2 years ahead of initial predictions). This is reflected in stock market where "reopening" stocks started getting their due. Let's look at some of the potential winners based on theme of "What would you do?"

As I wrote in "Million $ Teslas", it would be good to pick stocks based on activities which you would do or buy. If the answer to following questions is YES, then you can consider buying recommended stock(s) for your "YES" answers.

  1. Would you go to theaters to enjoy the summer blockbusters? AMC 
  2. Would you go on cruise in 2021? CCL
  3. Would you fly in 2021? JETS (ETF)
  4. Would you fill gas more often? CVX, BP, XLE (ETF)
  5. Would you take loans to buy house or start new business? WFC, JPM, XLF 
  6. Would you go to theme park in 2021? DIS, CMCSA
  7. Would you stay in hotel or shared home? HST (ETF), ABNB
  8. Would you visit mall for shopping (like visit Great Mall or Stanford Mall in Bay area)? SPG, MAC
  9. Would you do home renovation project? HD, LOW
  10. Would you buy a new 5G phone (iPhone 12s)? AAPL, SMH
Even if you don't do any of above mentioned activities, you must meet friends and families and go out for hiking, do backyard barbecue party, play in-person board-game or just have a drink because its PRICELESS!

As you can see, many growth tech stocks are missing from the list because you must have been using those products and services during pandemic and may already have good amount of exposure to those growth stocks. While recent market churn may have caused some indigestion, growth stocks work best when you hold them for many years for growth to play out. So don't panic - its classic vanilla correction which happens every few months. While 2020 was a big year for growth since multiyear growth was pulled in short-time due to pandemic, 2021 would be year of value and small/midcap stocks.  Its best to have balanced exposure with ETF across the spectrum such as SPY, IWM, MDY, XLE, XLK, XLF

Life is going to be normal again so get ready to enjoy spring and summer!

/Shyam



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