1Q Forecasts: Vaccines Mean Hope Springs Eternal: Long MXN/JPY, Long Copper (XCU/USD), Long RUT & NDX
There’s a gorilla in the room. My Top Trade Opportunities coming into 2020 were long crude oil[1] and long CAD/JPY[2] because, “Global Recession? Take the Under.” Now that the laugh is out of the way, in my defense, no one had “coronavirus pandemic” on their bingo card going into 2020.
With that said, my Top Trading Opportunity of 2021 might as well be called: “Global Recession? Take the Under (Take Two)”, as it were. This time is different (always fatal words, but I insist!).
The coronavirus vaccines are being deployed in developed Western economies, marking the beginning of the end of the pandemic. Economic activity is coming back to life. Airports are getting busier, and ports and shipping lanes are becoming more active.
In this low interest rate world with pent up aggregate demand and significant slack in the world’s major economies, there is ample room for growth. If growth is the story of 2021, the underperformers of early-2020 should do well.
US NASDAQ (NDX) Daily Chart (Dec 2019 to Dec 2020)
Chart prepared by Christopher Vecchio, created with TradingView
In the equity space, this means companies with less-robust balance sheets and economic performances that may have disappointed during mid-2020. I like those that have high betas relative to the US S&P 500[3]; small cap and mid cap stocks should outperform large caps ex-tech (to this end, the Russell 2000 offer more potential than the S&P 500). But the Nasdaq[4] 100 still looks like it wants higher; the symmetrical triangle breakout in early-December 2020 appears to be just getting started.
