Chris Harvey, the head of equity strategy at Wells Fargo & Co (NYSE: WFC) advisory unit Wells Fargo Securities, gave his top 10 predictions for 2021 in an interview with CNBC’s Trading Nation.
During the show, Harvey remarked that the markets and stocks could react much faster under present conditions than the ecosystem two decades ago.
Harvey’s top prediction is that Tesla Inc’s (NASDAQ: TSLA) could become what AOL was in the late 1990s.
What Happened: Harvey said that Tesla could face 2021, what AOL did in the late 1990s, albeit at a much faster rate. “After ’99, many tech and growth companies lost 50% to 100%,” Harvey told CNBC.
“We’re thinking in 2020; everything happens much faster. So, if it took 12 months for the end to begin, now it’s going to take six months,” Harvey added. Apple Inc’s (NASDAQ: AAPL) plans to enter the self-driving EV segment by 2024 could also hamper Tesla’s prospects.
Related News: Why Apple Could Emerge As Tesla’s ‘First True Competitor’
AOL’s inability to keep up with the rapid technological innovations led it its decline over time. AOL was finally acquired by Verizon Communications Inc (NYSE: VZ) in 2015 for a cash consideration of $4.4 billion
Why Does It Matter: Harvey clarified that these predictions are “not stock calls” but rather Tesla’s striking similarity with AOL’s trends in the past; like being a company with a “game changing technology” and a high future potential, its inclusion in S&P 500 Index and an “incredible performance.”
Since the beginning of 2020, Tesla’s stock price has gained approximately 6.7x times. Harvey believes that investors should not expect “growth at any price” after the massive stock surge.
Other 2021 Forecasts: Among others, Harvey predicts that Republicans will retain Senate control based on polls. “It’s very good if they do retain control of the Senate for the equity markets,” he said.
Stock charts and quantitative analysis need not look good in 2021. According to Harvey, clients should focus on the market’s cyclical nature and include “high COVID-19 beta stocks in their portfolios.”
COVID-19 fatigue, lockdown measures will negatively impact incumbents’ re-election efforts.
Average stocks might fare better than large-cap stocks, while small-cap stocks are set for a resurgence. Harvey also predicts that market volatility might slow down.
The S&P share buybacks could grow two-fold compared to 2019, and cryptocurrency might come to the fore as a preferred speculative instrument.
Harvey also labeled 2021 as “the year of not good enough.”
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