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Is the Market in for Trouble in 2021?

By Danny Vena, Keith Speights, and Jason Hall - Feb 11, 2021 at 5:00PM

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After a couple of years of outstanding returns, can stocks continue to gain this year?

The past couple of years have been good ones for stock market investors. In 2019 and 2020, the S&P 500 gained 29% and 16%, respectively, hitting new all-time highs in the process. However, the economic uncertainty caused by the pandemic is far from over, leaving some to wonder whether 2021 is the year it all comes undone.

On this clip from Motley Fool Live, recorded on Feb. 1, "The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Keith Speights discuss the challenges that remain and how to plan for what could be ahead.

Jason Hall: So just looking at where we are a year to date. This is the first day of February, so we got a month under our belts. The S&P 500 is almost flat. It's up 0.7%. Nasdaq is, again, as we've seen is crushing it up over 4%. The Dow is down 1%. Here's my question. Here is the over-under. Danny, I want you to take this one first. The S&P 500 will gain 15% in 2021. You are taking the over or the under there?

Danny Vena: I'm going to be Danny-Downer and I'm going to take the under. The reason that I am going to take the under is that I was looking at my portfolio this past weekend and looking at historical numbers for how my portfolio has performed, and it seems like that every year after I have massive gains, and my portfolio was up over 90% last year, every year after my portfolio has massive gains, it has a year where it does almost nothing. So I wouldn't be surprised if my portfolio is flat for 2021. If that's the case, I am going with the under.

Hall: Keith, what do you say here, buddy?

Keith Speights: I'm going to agree with Danny. I'm going to go with the under. Reversion to the mean kicks into play. I don't think the S&P will be negative this year. I actually think it will turn in a positive performance. I don't think it's going to be nearly as robust of a performance as last year, and may not even be double digits. If I had to guess, I'm going to say high single digits.

Hall: I'm going to take the under here too. I'm sure we're going to see like a 25% gain [laughs].

Speights: We're going to all be wrong, and we'll all be glad we're wrong.

Hall: Exactly. This is the kind of thing where we can be glad we're wrong because I know none of us are investing based on expectations. We're not all selling our best stocks expecting a bad year and then we can buy when they're cheaper. That's not how it works. We all know that's not how it works.

But here's what I am doing. There's one strategy I've taken, I've talked a little bit about this, is I've looked at my portfolio. An area that I've seen opportunity is in real estate and in some companies in infrastructure and other areas that pay pretty good high-yield dividends and I see some value there, and then I think I don't have as much exposure to as I want to.

So personally, I've started thinking about ways that I can allocate new capital in other ways to help bolster some opportunistic areas I see in my portfolio. I can promise you this, guys. I think I'll get a couple of heads nodding with me. If some of our big tech winners that we've all enjoyed over the past year, if they do have a bad year in the fall, I think we're going to start thinking about maybe buying on the dip. I'd love a good market crash, guys. [laughs] I'm 44. I want to buy some stuff.

Speights: Wasn't it exciting about last year around March? That was the most fun I'd had in quite a while.

Hall: It was, in a strange perverse way, yes, absolutely agree. Within the context.

Speights: It was within the context of investing. Obviously, people losing their jobs is never a good thing, but stocks were much more attractive when the market fell.

Hall: Danny.

Vena: Some of the best money that I made last year was on stocks that I bought during the month of March. I had, what was it? The Trade Desk (TTD -18.51%). I doubled down on my position in The Trade Desk and then it went up like 600%, 700%. I looked like a genius. Every now and again, even a blind squirrel finds a nut [laughter].

Hall: I'm going to share an article that I wrote on March 29. This was six days after the bottom. This is titled "15 Stocks I Bought in the Coronavirus Crash." Technically, we were still in the middle of crash when I wrote this article. But these are 15 different stocks talking about just throwing money at stocks when they're crashing. When you see stocks fall 25%, 30% or more and everything's falling, that's the biggest buy signal you'll ever going to get. It's fun stuff.

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