America Is The Spending King

It’s important to note two points. Firstly, the consensus can be right as we just showed. It probably will be right because it’s so easy for inflation to increase compared to last year. The 2nd important point is this survey doesn’t mean investors are expecting 4% CPI. It’s just that everyone sees inflation increasing. Don’t equate that to mean investors see inflation reaching an all-time high. Similarly, the highest percentage of investors since 2002 see profits increasing. Of course, profits will increase from the suppressed 2020 results.

The chart below shows the biggest expected themes for 2021. Only 20% said a failed vaccine rollout. That’s still possible in some countries, but in America, the odds of that are decreasing every day. There would need to be an unexpected catalyst for America to not reach herd immunity this year.

The 2nd most common answer was excess sentiment providing limited gains. This isn’t the survey response you want to go contrarian on. There are high valuations and sentiment is very bullish even if about half of fund managers see it. In fact, it’s very difficult to not see the speculation in markets. In 2020 we saw the lower the stock price, the better the returns. Stocks less than $1 per share rose 50% on average. That’s clearly just speculation by retail traders because there is no benefit to having a low share price. The only issue with this theme is it’s possible the speculation ends this year or later. You can’t reason with irrational behavior.

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