North American markets, viewed several hours before the 9:30 a.m. EST opening, look positive with all major indicators in the green at time of writing. That reflects New Year’s optimism and a belief that tomorrow’s election in Georgia will resolve the situation in Washington.
European markets are open with major indicators in the green at time of writing. They had been in the red, likely as a reaction to United Kingdom Prime Minister Boris Johnson’s warning of additional lockdown measures to come. However, they shifted firmly into the green just while I was assembling this column.
The final version of the divorce proceedings from the European Union – BREXIT -- lent some clarity to the British situation. “The FTSE 100 is kicking off 2021 in style, with the headline UK market enjoying an impressive 3% gain in early trade,” according to Joshua Mahony, Senior Market Analyst at IG Group, a London-based stock firm. “With Brexit finally here, there are precious few signs of initial difficulties allaying some of the fears over what the eventual exit could look like,” he says.
This week will not likely see a quiet start to the year.
The markets – and many investors -- are awaiting clarity on the makeup of the next Congress. Control of the United States Senate – a major determinant in the fate of President-elect Joe Biden’s agenda, will be decided in the Georgia runoff elections tomorrow with results expected during the evening and Wednesday morning. If Republican senators David Perdue and Kelly Loeffler win tomorrow, the Republicans maintain a slim majority in the Senate, effectively meaning that they can block at least some of Biden’s goals. If the Democrats win here that would mean that the Senate ends up with a 50-50 split and the tie-breaking vote would rest with Vice- President elect Kamela Harris.
At the same time, there is a nervousness over the moves of incumbent President Donald Trump and a questioning about what he will do if the Republicans carry Georgia and -- as well – a questioning about what he will do if the Republicans do not carry Georgia.
Likely to continue this week is the incredible two-way tug between the good news about vaccines and vaccinations and the mind-numbing and deeply troubling reports of deaths in most countries. The two sets of reports on the same TV screen are alternately cheering and frightening. The reports from California and New York are absolutely devasting and what has not yet become clear is the toll from Christmas travelling.
Looking forward to March could clear up some of the confusion, suggests Gavin Graham, United Kingdom-based financial analyst and media commentator. “Enough people will have been vaccinated by the end of March to allow some return to normalcy by then,” he suggests. “Certainly, that’s what the market is pricing in.”
Graham projects that if countries can vaccinate their vulnerable populations – including those over 60 years of age and frontline workers by Easter there would be no need for lockdowns which he believes have not been very effective in stopping the spread of the virus. In the United Kingdom that would mean 2 million vaccinations a week, in the United states it would mean 10 million and in Canada it would mean about 1 million.
TESLA -- and along with it, the entire electric vehicles space is likely to be one of the most watched stocks thus week and for weeks to come, according to Dan Ives, Managing Director of Equity Research at Wedbush Securities in New York.
Ives believes that 2021 will see what he calls a ‘major inflection of EV demand globally and that EV vehicles will account for about 10% of auto sales by 2025. Within that, China will be a major driver for TESLA’s future growth, in his estimation. “We believe this demand dynamic will disproportionately benefit the clear EV category leader TESLA over the next few years especially in the key China region,” he projects. His predictions include a potential doubling of EV sales in China over the next few years.
Whether TESLA continues to hold its commanding position in the electric vehicles space remains to be seen as the inevitable competition increases. Growth companies will look to expand where there is potential, suggests Jay Nash, Senior Vice President at National Bank Financial in London. “TESLA has been the leader in the EV/battery space and there are a lot of companies looking to move in,” he says.
There may have been a hint of what is to come just before Christmas on December 22. TESLA had joined the S&P 500 but dropped on December 22. That, says Nash, may have been due to reports on the previous day that Apple planned to bring a self-driving electric car to market by 2024.
Still, the game plan between the two companies is very different. For TESLA, the EV is basically the core of its commercial activity. For Apple, an electric car would be both an additional – though all-important – product line and a means of diversifying its revenues and perhaps compensate for slowing iPhone sales.
In the end, that would mean yet another competitive front for Apple: as it already competes in smart phones, computers, and entertainment with streaming behemoths Disney+ and Netflix.
This EV field is so new it is reasonable to believe that some entrants will survive and prosper, and some will not, as can be the case with a new technology. For those looking to invest in it, one solution – after consultation with a licensed financial advisor -- might be an exchange-traded fund specializing in this sector where the manager or managers keep on top of the changing technology.
Disclosure: I do not own shares in any company mentioned in this column.