2020 was a challenging year for many, with the pandemic affecting nearly all facets of life. Despite the widespread, largely negative effects, the broader indices ended the year at all-time highs. This was very unexpected considering the massive bear market that unfolded in March of 2020. Believe it or not, the S&P 500 finished the year 18% higher, the Dow Jones Industrials advanced 9.6%, and the NASDAQ market catapulted 44% in 2020.
2020 was an impressive year for technology stocks and, thankfully, tech was our top focus sector last year. As we begin 2021, we are excited that our stocks still have strong F-E-V-R-R scores. By focusing on each company’s financial health, earnings trends, valuation, risk level, and relative strength, we were able to stay ahead of the curve through the twists and turns of one of the most volatile markets of all time.
We expect 2021 to continue to be a prosperous environment for momentum stocks, particularly in the technology sector. We continue to see amazing opportunities in this sector.
This week, as Wall Street returns from the holiday season, market trading volume should begin to pick back up. Additionally, this month is when the analyst community begins to upgrade stocks before the fourth-quarter earnings announcement season begins
Interestingly, analysts have already started to increase their fourth-quarter estimates. Analysts have increased earnings estimates by more than 10% over the past three months. As the fourth quarter earnings season begins, another round of quarterly earnings surprises should set the stage for higher stock prices this month and next.
According to FactSet, fourth-quarter estimates have already improved. Originally, the S&P 500’s fourth-quarter earnings estimates were calling for a 12.8% decline in year-over-year earnings. However, consensus estimates are now calling for a smaller decline of 9.7%.
Some of our “proud to own” stocks, on the other hand, are actually expected to post year-over-year sales and earnings gains in the fourth quarter. From now until then, any dips in the market will represent a great buying opportunity.
As the year progresses, we will continue to focus on finding great investment opportunities, along with companies you can be “proud to own.” Our combination of financial and moral screens is the “secret sauce” that helped Faithward clients make great progress in 2020. We expect more of the same in the year ahead.
Romans 8:28 is a verse that motivates our team to continue the time-intensive research process: “And we know that in all things God works for the good of those who love him, who have been called according to his purpose.” We continue to put God first in our financial plans and allow Him to direct our steps. We are looking forward to discerning His direction in 2021!
Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights
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