What to Expect for Markets in 2021, According to Barron’s Roundtable Members

By Shaina Mishkin

Jan. 11, 2021 7:57 pm ET

Among other factors, Barron’s Roundtable members say the successful distribution of a Covid-19 vaccine will fuel even further gains for the stock market.

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With a year unlike any other in the rearview mirror, the members of Barron’s investment Roundtable foresee an economy still in recovery in 2021—though one with plenty of opportunities for investors.

Rupal Bhansali, Sonal Desai, Abby Joseph Cohen, Mario Gabelli, Todd Ahlsten, James Anderson, Henry Ellenbogen, Meryl Witmer, Bill Priest, and Scott Black shared their outlooks on the economy and markets with Barron’s subscribers during the first-ever virtual Barron’s Roundtable Q&A session. The group convened Monday for its annual Barron’s investment Roundtable discussion, which will be covered in depth in Barron’s over the next three weeks. Today, the Roundtable members gave an overview of their expectations for the year, speaking to an audience.

While many of our expert panelists see a potential double-digit drop for stocks during the year, they believe the Federal Reserve will continue to take extraordinary action to prevent long-term losses and distribution of a Covid-19 vaccinewill fuel even further gains.

The U.S. economy is entering 2021 with some significant tailwinds, including expansionary monetary policy and fiscal policy, said Sonal Desai, chief investment officer at Franklin Templeton Fixed Income. Still, investors should be cautious about the potential for more lockdowns to control the spread of coronavirus, while corporate taxes might rise in the second half of the year. “I think these are factors which are not fully in prices. I do think that valuations are pretty stretched,” Desai noted. 

Members of the Barron's Roundtable of investing experts share insights on what will drive markets and what to expect from the economy in 2021.

Other factors—like the course of the pandemic and political unrest—cloud institutional investors’ ability to forecast, said Abby Joseph Cohen, senior investment strategist at Goldman Sachs. However, the outlook could brighten in the second half of the year. “By the time we get to the second quarter and third quarter, more vaccinations, warmer weather—all of that will be helpful,” Cohen said. “We think U.S. GDP growth will pick up at that point in time, but we need to be watching carefully, in terms of how the rollout proceeds.”

An effective vaccine rollout could send markets up eight to 10%, noted Scott Black, founder and president of Delphi Management. “If we’re not successful, the economy really doesn’t reopen, and we don’t kickstart consumption and people going out again,” Black said. The Roundtable member is cautious about so-called stay-at-home stocks that performed well during the pandemic. “Most of these companies have nominal earnings or zero earnings,” he said.

Bill Priest, executive chairman and co-chief investment officer of Epoch Investment Partners, said “a passion for living and experiencing of life,” much like the Roaring ‘20s, is on the other side of the pandemic. “There’s a tremendous amount of expectation built into the success of the vaccine,” he added.

The post-vaccine world will look different from the world that came before, said Henry Ellenbogen, chief investment officer and managing partner of Durable Capital Partners. “This has really unlocked the ability to work remotely, which is going to change industries like health care, education, as well as the way we access services,” he said. “You want to own companies that are going to basically be sustainable and durable on the other side.”

Investors can also look forward to growth, said James Anderson, partner and head of global equities at Baillie Gifford. “What we are incredibly excited about though is the level of change, innovation, and exponential growth that can happen in major portions of the economy,” Anderson said. “It’s true with health care, where finally Big Data is beginning to have an impact and genomic sequencing is critically important.”

There is also opportunity in environmental, social, and governance, or ESG, investing in 2021, said Todd Ahlsten, chief investment officer at Parnassus Investments. “The importance of companies playing a role to help stabilize society, innovate, bring people along and do that in a way that’s constructive to returns on capital will be even more valuable to society and markets,” Ahlsten said.

The broader market could face some big dips in 2021, Ahlsten noted—but it’s likely that fiscal and monetary policy will help smooth it over. “Any correction that we see in 2021 will likely be met with an even bigger bazooka of stimulus in the Fed,” Ahlsten said.

There’s also a risk of a bubble burst, said Rupal Bhansali, chief investment officer and portfolio manager of international and global equities at Ariel Investments. “I think that after the party—and it’s been sort of a decadelong party, frankly, driven by record levels of stimulus and asset price bubbles—there will be a hangover,” Bhansali said. “Bottom line: a lot of the good news is priced in [but] the bad news is not,” she told subscribers, adding that investors may find more opportunity in dividend-paying stocks. “We just had the biggest test of dividend continuity. If a company managed to pay dividends in 2020 and did not suspend or cut them, I think they passed the dividend continuity test.”

Politics could also present a risk, said Meryl Witmer, general partner at Equal Capital Partners. Increased corporate tax rates under a Biden administration could weigh on the market. “My advice is: make sure you have some dry powder,” Witmer said. “I think that’s the most important thing so you can buy when others are fearful, and that’s really key.”

A Biden administration could also bring more stimulus. Mario Gabelli, chairman and CEO of Gamco Investors, said another round of stimulus is likely. “From that point of view, the economy will be OK, the consumer’s doing well,” he said. Gabelli says he is investing in companies focused on reducing the use of plastics and addressing climate change.