ST. LOUIS — With a booming stock market, a changed political landscape and an ongoing pandemic, St. Louis money managers offered investor wish lists for economic and social conditions in 2021.
Ward Brown, a trader and analyst at Clayton-based Argent Capital Management, called his list "the framework for what a good year would look like." What he said is needed:
• Earnings growth to support the current high valuations: "The market is expensive relative to history and has priced in quite a bit of the recovery. The best way to alleviate that is for companies to continue to earn more than expected," Brown said.
• Economic recovery to support earnings growth: The passing of addition fiscal stimulus would help to bridge the gap between now and the reopening of business, plus the resumption of travel.
• Strong market breadth: A wider array of stocks need to participate in the recovery – not just the big tech stocks. "For example, Apple’s market cap, the value of all of its share of stock, is now worth around $2 trillion – just a few years ago no company had a market cap of even $1 trillion," he said. Facebook, Apple, Amazon, Microsoft and Google collectively accounted for more than 48% of S&P market gains as 2020 came to a close. Recently, small and midsized companies, some residing in the value sector, have done well, and that “catch up” needs to continue.
• Slightly higher interest rates: This speaks well for higher economic growth expectations. The 10-year interest rate is back over 1% for the first time in quite a while. The Fed indicates it will continue its current policy, which will be good for banks and keep the yield curve where it should be.
Ken Bower, CEO and managing partner at Clayton Financial Group, wants to see more details on government spending, higher yields on fixed-income investments, and an unleashing of consumer demand.
• Definition and clarity around government spending related to coronavirus and stimulus and infrastructure projects: "This will help the markets reassess pricing," he said.
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