LONDON, UK / ACCESSWIRE / December 19, 2020 / According to Bradley John Alexander, Libertex Senior Analyst, every year in December, analysts are asked to take a look into the next year with our best judgement, experience and crystal balls. Let's face it: we would be hard-pressed to find any article from last year that predicted anything like 2020!
Several things went wrong for the economy in 2020 and this is what we should aim for 2021:
Firstly, diminishing COVID lockdowns, with the ability to travel locally and globally, the demand for WTI and Brent Crude will stabilise, thereby avoiding the disaster of the May 2020 WTI Contract going to -$40 per barrel on storage issues.
Secondly, as traders expect some form of normalcy. How many times were your intraday trades in EURUSD, the NASDAQ, XAUUSD and myriad others completely disrupted and sent the wrong way by misinformed, aggressive and unnecessary ‘fundamental events'?
The saving grace of 2020 was the optimism of large investors who ‘bought the dip' in equities after the COVID crash and the central banks around the world who are using every tool at their disposal to keep economies afloat. These, combined with strict financial regulations, helped us avoid catastrophes like the Great Depression of 1929.
Surveys show that net central bank and institutional purchasing of gold should increase over 2020 rates, keeping XAUUSD at current levels. Of course, any disruptions with equity sell-offs, bad news regarding COVID-19 vaccines and lockdowns will invoke safe-haven buying of gold, driving it higher still.
Almost all central banks seem uninclined to entertain interest rate rises in 2021 because many corporations worldwide are struggling with higher-than-average debt burdens and lower sales due to the coronavirus pandemic. The general consensus is that most central banks have run out or are running out of tools to balance their economies, and we may see a few lowering interest rates, perhaps into negative territory. This will, of course, devalue their respective currencies and increase the export potential for corporations within these economies.
Another tool in the bag of central governments is the ability to raise taxes, when required, to try to offset the crippling sovereign debt caused by coronavirus stimulus plans. Who, where and when will be critical questions for investors as we head into 2021. Any tax increase will bolster the value of any currency and, as we trade FX in pairs, the question will be ‘who will be the first to blink?' For example, if any major economy raises taxes before another, this will cause an imbalance that every FX trader will recognise and be able to take advantage of financially.
Initially, governments will try to avoid taxing corporations, which are trying to maintain their payroll and employment initiatives. Instead, they'll go after capital gains and high-net-worth individuals.
An event that may define the mood for 2021 is the 5th of January US Senate run-off in the state of Georgia.
With total control, the newly elected US government must rush through the next package of stimulus to bolster the US economy, thereby weakening the USD and increasing share prices on most US equities and indices, such as the NASDAQ and the S&P 500. Also, getting COVID-19 under control with vaccines, decreasing virus reproduction number and loosening universal travel health regulations will see equities from the travel and leisure sector recover.
Of course, it's not possible to look at 2021 and beyond without taking into account the pharma sector. Any more good news and progress on COVID-19 vaccines will boost share prices. But any news about side effects or failed vaccines will have a negative effect.
Having said all this, the biggest source of optimism it looks coming from new establishment's ability to restore normal trade relations around the world, especially the challenge with China.
Bradley John Alexander says: "The statistics don't lie: globalism is far better than populism for all economies around the world. We can expect rising indices - anywhere from the China A50, Nikkei and Hang Seng, to the DAX and FTSE, to the Dow Jones - if we see progress, fair trade agreements and cooperation between nations instead of the antagonistic tactics and intentional alienation of partners perpetuated by the current administrations".
Renewed interest in the crypto market by big investors, with instruments like Bitcoin and Ethereum, look positive for 2021 despite regulators clamping down on crypto derivatives. Libertex is offering Bitcoin as a bonus to Visa credit card users, and PayPal is rolling out cryptocurrency trading on its platform.
And last but not least, governments and investors all over the world, heavily encouraged by central banks, will be investing billions in green initiatives and companies supporting these initiatives. Influencers like Mark Carney and Christine Lagarde have stated, "It will be expensive but we can't afford NOT to do it". This will pave the way for new potential and some exciting investment opportunities in 2021 and beyond.
Libertex provides convenient, fast and secure access to the financial markets. The Best Trading Platform of 2020, according to European CEO, FX Report Awards and World Finance, will dive into 2021 with a wide range of offers. These include over 250 tradable assets, the exclusive Trading Signals service, a demo account to practice with EUR 50,000 and payment methods such as PayPal, debit and credit cards, wire transfers and many others. Libertex also has the most comprehensive financial and trading education programme available for free so that expert and newbie traders can Trade For More on their smartphone with the Libertex app and on their computer browser.
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Giorgos Stylianou
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SOURCE: Libertex Group