Now that the US election is all done with and Biden is now President which we predicted, somethings have gone differently to what we first thought.
The stock market has soared. This is due for a few different reasons, firstly the US has certainty as they have a new president and the markets don’t seem to care that its Biden and I believe that is because the federal reserve is going to keep stimulus going regardless of who’s the commander in chief. Secondly, vaccine news, there have been at least 3 different organisations that have released effective vaccines which the markets have seen very favourably upon. Thirdly, the markets – for the most part – have priced in the effects of COVID and because the markets are forward looking, they are already looking forward to mid to late 2021 where the markets think things will be back to normal.
What does this all mean for your money? Well, I think to start off, our hedging strategy (investments in gold and silver) may not be effective anymore. Why? Well the Stockmarket has priced in the goodness which means equities are hot and there’s no need to hedge using the precious metals, especially since the FED has confirmed it will deliver more stimulus. The increased popularity in Bitcoin has also lead to the decline in demand for precious metals. All of this being said, I believe there still might be a potential play for precious metals in the future, this is because I believe that there is a global corporate credit bubble brewing. If you look at the global debt levels of companies before the pandemic its an eye watering number, now that companies have taken on more debt to survive the pandemic, the situation can only be worse. Once this bubble burst there is a huge amount of systemic risk among numerous industries, especially in the western world, so we could see a demise similar to that of the banking industry in 2007-2009.
Anyway enough of that. Here are some investments I want to make in 2021:
DIGS – GCP Student Living PLC, this is a REIT based on uni student accommodation mainly focused on the south and south east of England. The price at the moment is around £1.45 per share, before covid it was around £2.00 – £2.10 per share. It pays a small dividend and is a relatively healthy company. In my opinion this stock has the potential to rebound once the uni lifestyle is back in following which could be as soon as the new year. My thinking behind this investment relies on how students get the funds. Most students get a maintenance loan to help pay for the rent for accommodation. Every student is entitled to this kind of loan, therefore students will always have the money for most of the rent payments. This is good for DIGS as their income is effectively taken straight from student finance, which is almost like guaranteed income. More and more people go to uni year on year which bodes well for this company and is the main driving force behind why I think this investment has potential.
IDRV, this is an ETF that focuses on self driving EV vehicles and tech companies associated with them. This could be a very valuable industry in the next few years as Tesla has been at the forefront of this industry but now a lot of the big boys in the car manufacturing industry have started to create their own EV’s and some of them with autonomous driving also. So I think this is a more risk averse approach as its in an ETF and is effectively investing in the industry rather than handpicking some companies.
Those are my thoughts for the near future, will update soon with a portfolio update.
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