My Thoughts on the Market: 2021

Zachary Horvath

Zachary Horvath 2021-01-06 2 min read #business

As a student of economics, I'm in constant search of financial knowledge. I've recently directed that pursuit more into investing. I've been hearing sentiments that 2021 is going to be a tough year for investors and I believe this to be true for many reasons. While I won't give specific financial advice, prepare your portfolio for a huge crash at some point this year.

The COVID-19 pandemic has wreaked financial havoc on most sectors. There are a few broadly successful outliers and this is always assumed. The second wave of the pandemic has further intensified this economic destruction. Coupled with a lack of financial stimulus, the downturn in 2021 expected is to be severe. I believe much of the current stock market gains are hyper-inflated. 2020 was a largely ill-omened year and the 16% gains in the S&P 500 are outrageous compared to the suffering of the majority.

I'll use the immense bubble of stock we call Tesla (TSLA) as an example. The TSLA stock grew 705% in 2020 and has current market cap of over $600 billion. Based on their total number of cars sold, this equates to a stock valuation of over $1.25 million per car sold each year. As a reference, GM's number is $9,000 per car sold. This difference is staggering and should be alarming for any investor. The growth here is simply unsubstantiated and unsustainable going through the year.

I'm always careful to invest when the markets are doing well, especially when this success is not matched by economic success. It won't be long until the markets catch up with the current state of the economy. With that being said. any investor worth their salt will understand the opportunities here. Just look at the success people had with the 2020 crash in March. If you invested properly then, you'd be thanking yourself at this point in time. Unfortunately, this current market success is doomed.

Going through this year, always remember to remain in the present moment and learn to identify long term trends. Don't panic! A cooler head always prevails, especially when it comes to investing. This strategy remains constant in economic prosperity and in economic recession. Stay focused on the metrics, remain calm in decision-making, and trust your process! With the right plan and mindset, 2021 can be a hugely successful year for your portfolio.