Sector Investment Analysis 2021

See also: Financial Markets in 2021

On January 31, 2021, I looked at a number of sectors and specialty mutual funds with the intent of figuring out good investments. Looking back 1, 3, and 5 years, this is what I found for annualized return.

Fidelity Symbol Fidelity Fund 1 YR 3 YR 5 YR
fbgrx Blue Chip Growth Fund 59.09% 26.80% 26.25%
fbsox Select IT Services Portfolio 16.95% 18.78% 22.24%
fncmx NASDAQ Composite Index® Fund 43.83% 21.81% 24.22%
fsdax Select Defense & Aerospace Portfolio -7.97% 4.70% 12.67%
fselx Select Semiconductors Portfolio 50.40% 26.37% 33.41%
fsmex Select Medical Technology and Devices Portfolio 30.04% 25.10% 21.91%
fbiox Select Biotechnology Portfolio 38.34% 18.86% 10.37%
fsutx Select Utilities Portfolio 0.57% 10.23% 12.49%

After looking at these numbers and getting up off the floor, I read a couple of articles, and asked myself, with the current administration, which sectors are likely to do well in the next year. I’d seen this before but checked again, and stock market performance under Republican and Democrat administrations is about the same. The S&P 500 annual return since 1926 has averaged about 10%, I read this as American companies generally find a way to make money.

Now I am not a financial analyst, nor can I offer advice, but I can put an opinion out there and this is what I think about a few sectors for 2021.

Sector Up/Down Rationale for Up/Down
Department of Defence Down The previous administration was for DoD spending, money now goes to global warming or other green initiatives.
Commercial Real Estate Down Covid 19 forced and is forcing businesses to close, people work from home more often.
Blue Chip Up There will be supply chain issues but see a slow recovery to the economy and slow job growth. Corporate welfare.
IT Services Up All the at-home employees and students need upgraded computer equipment.
NASDAQ Up High tech will do well, corporate welfare
Semiconductors Up Taiwan, the major semiconductor producing country is seeing pressure from China. Barring war with China, world-wide demand will continue to fuel this sector.
Medical Technologies Up Americans are getting older pushing demand for products. Covid shuffled the deck a bit but overall the sector will continue to do well.
Biotechnologies Up With strong influence and money from lobbyists, barriers to entry will remain strong and the government to pick winners and losers.
Utilities Down Look at utilities to remain about the same while inflation creeps up. Result overall is a bit down from last year.

This is perhaps an overoptimistic view. For another perspective, John Williams from Shadow Statistics seems pretty sharp.

General Headlines from Shadow Statistics

  • Pandemic-Driven U.S. Economic Collapse Continues in a Hardening, Protracted “L”-Shaped Non-Recovery

  • Severe Systemic Structural Damage from the Shutdown Will Forestall Meaningful Economic Rebound into 2022 or Beyond, Irrespective of Advances in Coronavirus Vaccines and Treatments

  • Panicked, Unlimited Federal Reserve Money Creation and Federal Government Deficit Spending Continue and Will Expand, Triggering Major Domestic Inflation

  • With Fundamental Dollar Debasement Intensifying, Holding Physical Gold and Silver Protects the Purchasing Power of One’s Assets

Your comments are appreciated.

None of us is as smart as all of us - Bob Beyster SAIC