Whatever you are doing that’s working, stop it.
The cyclicality in investing is profoundly impactful. Unfortunately, most investors misread the signals and misplay their hand. They look for trends that have persisted and invest late in the game, often just in time for the reversal. Therefore, investing in last year’s loser is often a better strategy.
Segment follows this “invest for bottoms, not tops” methodology.
Last year, technology won the battle. That is unlikely to repeat this year.
Our bet is that energy is the surprise.
The supply glut the energy industry has endured over the past several years culminated in last year’s washout event, in which oil futures briefly traded under $0.
This means last March, an owner of oil had to pay someone to take his oil. Read more
This seminal moment challenged all notions of value. It created a cascading series of energy bond defaults and bankruptcies that left the survivors with fewer competitors.
If we were facing a second-term Trump administration, I would have argued for energy because demand would likely be higher post-COVID. Biden, on the other hand, is likely to enact policies that will reduce oil supply.
Since COVID has outlived its useful political life, as it is no longer needed to help unseat Trump, the impending lifting of restrictions makes economic recovery more certain. All of this makes Biden an oil-price-hike president, to the certain dismay of his green supporters.
Since this also plays well with our habit of choosing our tactical allocations off the bottom of last year’s performance ranking…
Energy is our odds-on favorite for 2021.