If 2020 was a year to preserve your finance, 2021 will be a year to multiply your wealth. The global economy has restarted with a bang and emerging economies are eyeing for a double digit GDP growth, along with high single digit growth in developed nations, thanks to low base, rock bottom interest rates, rapid technological adoption, ocean of liquidity and responsible US President elect. Let’s look at how some of the investment avenues will perform in 2021:
Gold: Gold glittered all its way in 2020, and reached all-time high of ₹56,191, after 2020-low of ₹38,400. Safe heaven nature of gold made it popular amongst the investors in 2020. However, in 2021 and the years to come gold may lose its shine. After the Global Financial Crisis, Gold reached an all-time high in mid-2011 and then delivered a negative return c.17% as on 2019 end. Vaccination drive has already put pressure on the yellow metal’s price and we expect it to remain stagnant or fall in 2021 and onwards.
Crude Oil: 2020 proved out to be a nightmare for crude, but it may not be the same in 2021. With Democrats taking control over the US Parliament, we may see a downturn in US oil production. Further, Saudi Arabia and OPEC’s recent announcement of production cut to revive oil prices will support the fossil fuel’s price. On the flip side, waiver of sanction against Iran may increase the global supply. Consequently, oil may hover between $50-$55/barrel throughout 2021.
Silver: Silver was the best performing precious metal in 2020, up over 49%. After such a grandeur year, if you believe silver may take a breathing in 2021, then you may be wrong. However, forecasting silver prices is relatively a difficult task due to its volatility, Silver is seen both as a safe investment asset class, as well as an industrial metal, due to its wide scale use. Overall, silver can be a very good investment for years to come, as the metal is highly utilised in green technologies. We expect silver to give double digit return in 2021.
Indian Stock Market: The bourses discounted almost all of the economic recovery in second half of 2020, and benchmark indices delivered almost c.15% return during the pandemic year. The Nifty50 is presently trading at forward 12 month PE of 22, compared to historic PE of 17.5. Rock bottom interest rates and sharper than expected economic recovery supports the stretched valuation. However, we see very limited upside potential left for the markets in 2021. YTD Return (29Jan21) of Nifty50 stands at –2.5%, setting the stage for low market returns in 2021. Overall, markets are expected to deliver single digit return in 2021, as it will try to align with the real economy during the year.
All the best for your investment journey in 2021!
Save more, invest wisely.