10 Hot Investment Themes for 2021

2. U.S. Economic Recovery

Worsening coronavirus trends and paused reopening processes will challenge the U.S. economic recovery until vaccines are widely available. The pace of the recovery will vary throughout the year until the entire U.S. economy can sustainably reopen and we can return to our "normal" daily lives. Adam expects the U.S. economy to return to healthy, positive growth on an annual basis, with GDP around 4% in 2021.

(Photo: Shutterstock)

3. Fixed Income

Global central banks reduced interest rates to record lows, and many, including the U.S. Federal Reserve, have vowed to keep interest lower for longer. Opportunities for yield are likely to remain restricted, but investors should not start to sacrifice quality in pursuit of relatively higher rates, Adam says. In 2021, he expect bonds to serve their traditional role of offsetting equity volatility.

(Photo: Shutterstock)

4. Earnings Rebound

In 2020, equity returns were driven by price-to-earnings ratio expansion as optimism surrounding the economic recovery resulted in record highs for the major indexes. A powerful earnings rebound is likely this year, with 20% earnings per share growth, which should help the S&P 500 reach new heights. Adam continues to favor large-cap growth equities in the early stages of the recovery, but says value and small-caps may outperform once the economy fully reopens.

(Photo: Shutterstock)

5. Information Technology

The pandemic forced companies to alter the way they do business, but it also revealed efficiencies in the way we live our everyday lives. Elevated technology investment and reliance has led the sector to permeate a variety of industries. Several long-term catalysts continue to favor the tech sector. Adam expects its strength to continue because of superior earnings trends and its involvement in sectors not previously associated with technology.

(Photo: Shutterstock)

6. Environmental, Social and Corporate Governance

The principles of ESG investing have been practiced for decades, but sustainable investing is likely to become even more widely adapted given the Biden administration’s emphasis on the importance of clean technology and the increased scrutiny surrounding the way companies provide for and care for the health and wellness of their workers.

(Photo: Shutterstock)

7. U.S. and Emerging Market Stocks

Major economies across the globe are expected to recover this year, but Adam says several factors continue to support his bias toward U.S. equities. He says that given his expectation for a gradual, sustainable reopening of the industries most harmed by the pandemic, superior sector exposure leads his firm to prefer domestic equities and emerging markets.

(Photo: Shutterstock)

8. Weak Dollar

The U.S. dollar reached its highest level since 2017 as the pandemic sparked demand for safe-haven assets, and now has weakened to the lowest level in two years.

Global economic recovery, ongoing aggressive fiscal and monetary policy, a growing budget deficit and possible easing of trading restrictions with China and American allies will likely prevent the dollar from moving higher. In this event, emerging markets, commodities and U.S. multinationals stand to benefit.

(Photo: Shutterstock)

9. Oil Price Recovery

The Saudi-Russian oil price war led to excess oil supply and the virus-induced lockdowns heavily restricted global oil demand, pushing oil prices to historic lows in 2020. In 2021, the gradual return to normality and accelerating economic activity should slowly restore global oil demand to pre-pandemic levels, and help support the industry’s lagging recovery.

(Photo: Shutterstock)

10. Active Management

Market volatility should decline throughout the year now that the U.S. presidential election is over and multiple effective vaccines are expected to mitigate the health crisis. Even so, pullbacks remain a natural, healthy occurrence in the equity market, Adam says, and investors need to have a plan in place in order to avoid making emotionally driven investment decisions. Active managers may be best suited to identify potential areas for opportunity, he says.

(Photo: Shutterstock)