Apparently, there’s no need to even wait for December to conclude and perhaps it wasn’t a difficult call. Runner-ups were also associated with COVID 19 such as “Asymptomatic” (who knew… ok that’s a poor pun) and “Quarantine”. For sports fans, “Mamba” references sadly grew due to the passing of Kobe Bryant who was nicknamed “Black Mamba”. Winning words from the past include 2008’s “Bail Out”, 2010’s “Austerity” which followed the Great Recession. 2012 was an ultra-tight race with “Socialism” squeaking past “Capitalism” perhaps offering a glimpse of a future political divide and a growing interest shared by upcoming young voters.
Obviously, it’s nearly impossible to pick the “Word of the Year” in advance but break out your crystal balls because I’ll be darned if I don’t take a stab at it. Now, as students of the stock market we are ingrained to believe the stock market tends to be forward looking. So, let’s put our own twist on Merriam-Websters selection process by putting on our Amazing Kreskin glasses (for non-baby boomers this will require a Google reference) and un-mask our best guess for Withum Wealth’s 2021 word of the year: “Rotation”.
In 2020 there were a composite of 495 stocks in the S&P 500 index that were stuck in the mud and isolated from the 5 largest stocks that seem to be in perpetual party mode. In finance terms this is referred to as narrow breadth. Markets can become a concern or even destabilize when a minority of participants or a narrow theme garner all the attention and investor love and leave little interest in the majority. The tech-wreck of 2000 was an example of an imbalanced market that no vaccine or otherwise could have cured. Today’s leadership of large-cap tech giants are stable in that they have more predictable cashflows and debatably acceptable valuations, but nonetheless are seemingly well loved. We believe, over an investment cycle, institutional investors will gravitate their investment dollars in a manner that aims to maximize risk adjusted returns and in doing so, non mega cap stocks will be re-discovered as may other asset classes both home and abroad.
If a vaccine represents daylight at the end of a tunnel, we must therefore still be in a tunnel. 2021 will hopefully bring much needed fiscal stimulus, the further reengineering of business and associated additive cash flow, lower unemployment, greater confidence, greater consumer spending, a bump in global travel and we think an opportunity to participate in a market that exhibits a deepening and somewhat changing leadership board.
Now just for fun, if we had to really predict Merriam-Websters 2021 Word of the Year, we might guess “Vaccine” closely followed by “Travel” as having massive year over year search increases.
Hopefully we weren’t too word-y.
