"Expect the Unexpected": Rally, Crash: How will the stock market year 2021 be?

2020 was an extremely volatile stock market year – the coronavirus pandemic is causing prices to collapse initially. At the end of the year there was a rapid recovery to new heights. But how does it look in 2021? Experts say where the journey could lead, identify risks and say which industries and stocks offer opportunities.

Investors cannot complain about boredom in 2020: First of all, the coronavirus pandemic will cause prices to crash in March. It's going downhill quickly and clearly. But at the end of the year, the Dax just exceeded the previous record high of February 17, 2020. During the Christmas break, two conflicts were resolved: On the one hand, there was a Brexit deal after a long struggle, on the other hand, US President Donald Trump has a US $ 900 billion -Dollar Corona stimulus package still in place. The start of the vaccination in many European countries also caused further optimism. So is it not so bad?

"2020 was one of the most demanding stock market years ever," says Carsten Riehemann, founding partner of the asset management company Albrecht, Kitta and Co. "This is mainly due to the sometimes extreme swings downwards and upwards alike the previous violence ", the market expert looks back. "This was followed by an equally impressive rally, which even culminated in new all-time highs in the USA. For example, the Dow broke the 30,000 point mark for the first time in November. And the Dax has almost reached its previous year's level again," emphasizes Riehemann.

"Unknown unknowns"

"The 2020 stock market year has shown the limits of what can be forecast," says Marco Herrmann, Managing Director of Fiduka Depotverwaltung. "'Unknown unknowns' was what ex-US Secretary of Defense Donald Rumsfeld called something: things that you don't know, that you don't know. Things that weren't on the agenda, for which you aren't prepared and which are therefore you also can't assess – like the coronavirus pandemic this year, "explains Herrmann. The development on the global financial markets and stock exchanges has also made one thing clear in his opinion: "When problems arise, the central banks try to fill them up with money and thus eliminate the world."

"The European Central Bank and the US Federal Reserve have ensured that there has been a V-shaped recovery on the stock indices, including the Dax," says Benjamin Feingold from Feingold Research. The financial market expert also sees a danger in this: "Investors have thus anticipated the recovery of the economy. Most of it has now already been priced into the prices," said Feingold. "The start of the new stock market year could therefore be a bit bumpy."

Starting difficulties in 2021

Fiduka managing director Herrmann also sees it this way: "January should still be mixed, also due to the second lockdown in the corona crisis in this country," says Herrmann. At the start of the year, he expects rather "cautious investors who watch how the whole vaccine issue" develops. Herrmann is certain: "We have already seen the vaccine rally."

Herrmann is more optimistic about the months that follow: "From the second quarter I expect a positive mood on the markets and further rising prices. Then investors will focus more and more on the economy – and things are looking good there." , emphasizes the Fiduka boss. For example, the International Monetary Fund (IMF) is forecasting a growth rate of 4.7 percent for Europe in 2021. "Government aid should then flow again," expects Herrmann.

Cheap money

For asset manager Riehemann, however, it is clear: "The prerequisites for a good start into the 2021 stock market year are definitely in place: There are vaccines against Corona. This is accompanied by the hope that we may even have the majority of the pandemic under control in six months or nine months could have ", Riehemann looks ahead. "Added to this are the enormous sums of money that the central banks will continue to pump into the market in 2021."

"The money from the central banks will continue to flow," says financial market expert Feingold, who is expecting a "positive, successful stock market year in 2021". "To this end, the markets will also benefit from so-called base effects: the companies are likely to exceed their sales and profit figures achieved in 2020, which were mostly negatively influenced and depressed by the Corona crisis, in 2021," he explains. "The key question here is whether they can beat the market's already optimistic expectations."

Risks to price development

Feingold sees expectations that are too high as a risk factor for the markets: "High expectations also offer the potential for disappointment," he explains. "The monetary policy of the central banks could also turn out to be a threat to the stock markets – if the ECB or the Fed reduced their bond purchases, which are currently supporting the stock markets. If the sums were reduced, the markets would have a problem," emphasizes Fine gold, which however does not assume it.

Fiduka managing director Herrmann also thinks this is unlikely. "Only in the short term" should a hard Brexit play a role, says Herrmann, who, like Feingold, advises that the subject of inflation should be "on the slip". "But it shouldn't play a role in the stock market, more so in bonds."

Herrmann, however, cites a wave of bankruptcies that may occur in 2021 as a risk factor for the markets: "If the economy picks up speed, the state will cut back its aid and companies may run out of money." He explains: "A company currently has all its employees on short-time work and decides to reorganize itself and dismiss a third of the workforce. As soon as the terminations have been issued, the short-time work allowance ceases and then there is a risk of insolvency very quickly." Herrmann emphasizes: "Rising insolvency figures can put a strain on the job market, the banks, and cause a bad mood in the economy, society and also on the stock exchanges."

"Expect the unexpected," says asset manager Riehemann on the subject of risk to the stock markets. "If the corona vaccines show previously unknown side effects, the pandemic could pick up speed again," he explains. "Even the easing of the trade dispute with China, which is emerging under US President Joe Biden, could only turn out to be verbal disarmament. The worst fears about Brexit could be exceeded – three risk factors that are responsible for a more pessimistic mood, divestments and thus falling prices the stock exchanges. "

Everyone is talking about cyclics

According to Riehemann, investors should keep these scenarios in mind. If these disruptive factors do not occur and the economy runs normally, the cyclicals should benefit first, "he says, but also advises investors to keep an eye on the" IT, telecommunications, online retail and biotechnology sectors that have done well in 2020 ":" They will stay further asked. "

Feingold Research sees it similarly: "I do not necessarily see the Corona winners from 2020 at the top of the winners' list in 2021. The home office trend will decrease somewhat, will fade away. People don't just want to communicate with each other via video conference, they want to communicate directly again meet ", he explains, but also says:" On the other hand, I assume that the big tech and online players, such as Microsoft and Amazon, will again be among the top performers in 2021, whereas Zoom will not. "

Fiduka managing director Herrmann agrees: "The reviews of Zoom or Tesla are exaggerated, completely gaga. A Microsoft is no longer cheap, but I still see price potential," explains Herrmann. He also gives cyclicals good performance opportunities, but puts it into perspective: "If cyclical, then more towards the semiconductor industry as well as automation, robotics and high technology."

According to Herrmann, banks should be cautious: "Price pressure, more competition from fintechs, investment pressure in digitization – that doesn't necessarily create an optimistic mood." According to Herrmann, the topic of climate change will continue to be in the foreground in 2021: "Climate change is a huge construction site with gigantic investment needs, which arouses course fantasies."

Like Riehemann and Feingold, Herrmann is optimistic about the coming stock market year and, like his colleagues in the financial market, assumes that it can be a "good stock market year". However, he advises a longer-term investment horizon: "Anyone who gets into stocks should never look to the next day or the next week, but rather bring a bit of patience and take advice from Andre Kostolany: 'You make money on the stock market with your behind . ' In other words, if you have the time, you have reasonable returns on the stock market. " If you as an investor take this stock market wisdom to heart, according to Feingold Research, the Dax 2021 "has a performance of a good ten to 15 percent over the year".