‘Tis the season once again to publish our investment predictions for the upcoming year. 2020 was an excellent year for investors and we generated some eye-popping gains in the Nicoya Research portfolios. We expect another banner year in 2021 and the following predictions represent the major trends that we are expecting to be dominant for investors. I’m channeling my inner Nostradamus here, but prediction articles are always popular and help new investors find our research services, so let’s give it a go…
1) Stocks will continue climbing higher, defying gravity. Equities are overvalued by multiple criteria, but they can get even more overvalued in the current accommodative financial enviornment. This will happen at a slower clip than was experienced during the post-Covid rally and will include a few major corrections. But in the end, we look for the S&P 500 to climb roughly 20% toward 4,500.
2) Gold will climb toward $3,000 per ounce, rising roughly 50%. This will be driven by increased debt monetization, sustained interest rates near zero, and unprecedented levels of stimulus to combat the economic impacts of Covid-19 and lockdowns. This is a $500 reduction from our prior 2021 target, as it seems Bitcoin is taking some of gold’s shine.
3) Silver will outperform gold, roughly doubling toward a new high around $50 per ounce. While gold reached new record (nominal) highs in 2020, silver still has a significant upside to return to prior highs. The supply/demand fundamentals are more favorable and increasing industrial demand in clean energy applications will be price supportive. The gold/silver ratio will fall back into the 50’s.
4) Battery Metals will have a breakout year. It has already started in late-2020, but I expect an acceleration of the recent price gains for metals such as nickel, copper, cobalt, lithium, and graphite. There are a handful of junior explorers that remain wildly undervalued in our view. We recently added 3 of these stocks to the GSB Portfolio in December. 2-weeks gains include 121%, 36%, and 23%. More of this to come in 2021.
5) Cannabis and psychedelic-medicine stocks will rise sharply. The Biden administration will likely face opposition from the GOP-controlled Senate (if they hold it), but we still view the change of leadership as a major bullish catalyst for US-based cannabis stocks. We favor US multi-state operators (MSOs), with our top 2 picks adding over 150% in 2020 and primed for another triple-digit gain in 2021.
With several cities legalizing psilocybin and Oregon becoming the first state in November to do so, there is a ‘psychedelic renaissance’ brewing. I’m not talking about more tye-dye shirts and jam bands, but increasing medical research showing the efficacy of psychedelics to treat a wide array of disorders including depression, anxiety, PTSD, and addiction. There are only a handful of companies in this space and their valuations have been climbing higher. This is the over-regulated Western medical establishment finally catching on to the power of plant medicines that have been used widely, mostly in other countries, for over 100 years.
6) Genome editing will start to gain wider acceptance, awareness, and adoption as a growing body of studies show how the technology can cure diseases, restore regular body functions, and perform medical wonders via editing DNA. It is being explored in research on single-gene disorders such as cystic fibrosis, hemophilia, and sickle cell disease, but also holds promise for the treatment and prevention of more complex diseases, such as cancer, heart disease, mental illness, and more. Our 2 top picks in this space generated returns of over 150% in 2020 and we think they are just getting started.
7) Bitcoin will post another triple-digit return in 2021, breaking $50,000, correcting sharply, and then making a run at $100,000 by year-end. Institutional inflows and companies shifting corporate treasury holdings to Bitcoin, following in the footsteps of Microstrategy (MSTR), will be key drivers of the continued gains in 2021. Retail adoption will also increase sharply with PayPal and other large consumer-facing companies onboarding new users. Demand will overwhelm supply output, with Grayscale Funds continuing to soak up all of the new BTC mined each month.
Ethereum will outperform again, finally making a new high (above $1,400) in the first half of the year and then climbing past $2,500 in the second half of the year. And at risk of catching hate, there will not be another massive altcoin season with widescale outperformance. Investors will have to be more discerning and focus on a handful of quality projects, rather than throwing darts and picking all winners. Decentralized finance (DeFi) and interoperability will continue to be major themes in 2021.
(And if anyone knows where I can get this fire pit, please let me know.)
Bonus: I think we could still see some big drama with Trump giving up power next month. My optimistic side predicts that Covid-related cases and deaths will drop sharply in the first half of 2021, but it still feels like this thing could be with us longer than most are anticipating. And unfortunately, I foresee new wars in 2021 with the change in US leadership, partly to distract us from the pandemic, lockdowns, and continued economic weakness. While the stock market roars, large numbers of citizens globally have lost jobs that are not coming back and will face serious hardship in this new normal. I don’t see a repeat of the housing crisis as the money printer going brrrrr at these levels is likely to lift prices for most assets. Unfortunately, wages will not keep up, highlighting the importance of investing in asset classes that outpace rising living costs.
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We are wishing everyone a Happy New Year, health, wealth, and wisdom in 2021!
