2021 could be a tough year for the US stock market

Stock market 2021 outlook from Charles Schwab’s Chief Investment Strategist Liz Ann Sonders

2021 could be a tough year for the US stock market

2021 could be a tough year for the US stock market

Ahead of 2021, investors are optimistic about stimulus measures from the Joe Biden administration, additional aid from the Federal Reserve, massive Covid-19 vaccinations, and, most importantly, a return to some sort of normal life..

There is no guarantee that this scenario will be realized. Stocks are so strong this year that all the good news of 2021 may already be reflected in prices. Stocks may find it difficult to keep rising.

Dow, S indices&The P 500, Nasdaq and Russell 2000 hit new all-time highs on Friday. This year index S&The P 500 is up nearly 15%, while the Nasdaq is up an astounding 40%.

However, this trajectory may not have a continuation..

«The market relied to some extent on a recovery from Covid-19 and a new peak in revenue. If the world doesn’t return to normal, investors will be disappointed», – stated in an interview with CNN Business Brad neumann, director of market strategy at Alger.

2021 could be a tough year for the US stock market

Expectations for a rebound in earnings in 2021 are sky-high. According to estimates compiled by FactSet, analysts are forecasting more than 15% year-on-year profit growth in the first quarter, nearly 45% in the second quarter and 22% throughout 2021..

These forecasts may be unrealistically optimistic, says Barry bannister, Head of Institutional Capital Strategy Department, Stifel. Bannister told CNN Business that his 2021 revenue projections are 11% below the Wall Street consensus, which will also push revenues below the 2019 pre-coronavirus level..

Bannister is concerned that investors may underestimate the possibility that Congress and the new Biden administration may disagree about the size of future easing on economic stimulus. Continued support for the economy and the market may become even more important for the Fed.

«The Fed is not interested in continuing to act in the first place because there is a danger that they will be the only defendants if dysfunctional fiscal policies continue.», – said Bannister.

Investors are also betting that several Covid-19 vaccines will be widely available in 2021, and that enough people will receive them to create much-needed collective immunity to the coronavirus. This can be a daunting task..

«The vaccine is great news. But how does an ordinary person get it? What if there are logistics and supply chain problems?» – asks questions Jay jay kinahan, Chief Market Strategist TD Ameritrade.

«There are disagreements on whether expectations will be met in 2021. This is why there may be some nervousness about consumer stocks.», – added Kinahan.

Kinahan noted that companies such as Disney and Starbucks, as well as major airlines and cruise lines, are in danger of another setback. Some of the stocks that TD Ameritrade investors have been selling recently have been United and Delta..

«Hopefully we will all be back in our offices by this time next year. But business travel may not be returning anytime soon. International travel is of no interest to anyone», – Kinahan believes.

With all this in mind, Bannister expects stocks to trade sideways next year..

Neumann is a little more optimistic. A weak US dollar should help boost profits for large multinationals, especially the big tech stocks that have been supporting the market over the past few years..

At the same time, Neumann does not call for the current rally in stocks to continue at the same pace for much longer..

«We are now in a lower profitability environment in the future.», – he said, adding that investors should expect the stock market’s annual gains in single-digit averages, not double-digit.

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