We’re only a few weeks into 2021, and yet there has been plenty of drama around changing leadership. No, I’m not talking about recent events in Washington. Or Joe Biden’s inauguration today.
I’m talking about leaders in the stock market. It’s been quite the turnaround. Some of 2020’s losers have become 2021’s winners.
Take the S&P 500 energy sector, for example. It ranks dead last among all sectors, losing 28% over the last year. But year to date, energy stocks are the best performing group with a gain of nearly 13%.
Recently, I showed you how to spot these opportunities that are just coming off the bottom. And the right timing can generate some pretty incredible returns in a short period (as you can see here).
You’ve seen that with my recent recommendations of the ETFMG Alternative Harvest ETF (NYSE: MJ) and the SPDR® S&P Oil & Gas Exploration & Production ETF (NYSE: XOP). Those picks are up 31% and 15%, respectively, since I recommended them just over a month ago.
And now I’ve spotted another industry that’s still bouncing off the bottom and ready to make its next move higher.
The Reasons Behind 2021’s Big Movers
When it comes down to it, there are two primary catalysts driving big stock gains this year:
- Reform. With Democrats securing narrow control of the Senate, reforms and stimulus are set to impact sectors that haven’t received much attention over the last several years.
- Reopening. Vaccine distribution is well underway despite early hiccups. That puts the economy on the path to a broad reopening.
MJ is an example of the former, while XOP is being driven by the latter.
But the second point is becoming a more powerful force for a handful of sectors … particularly those in service industries.
That’s because a massive pile of savings will amplify the reopening.
Last year alone, U.S. citizens saved up more than $1 trillion. Government stimulus checks, which largely went unspent, contributed significantly to that number.
Another contributor was plunging spending — especially among services. That’s because Americans stayed home rather than eat out, go to the movies, or take trips.
That savings pile looks set to grow, in large part thanks to President Biden’s $1.9 trillion plan, which includes more stimulus checks.
But what will be the trigger for a new wave of spending?
Ready For Takeoff
A broad reopening of the economy will depend on herd immunity to COVID-19. That’s why Biden also announced a $20 billion plan to accelerate vaccine distribution.
Despite the recent news that the vaccine rollout is encountering challenges, experts still expect that the U.S. is on track for herd immunity against COVID-19 by this summer.
Delta Air Lines (NYSE: DAL) CEO Ed Bastian echoed this belief last week and projected that it could allow the company to return to profitability around the same time.
That’s why now is the perfect time to grab shares in airlines with the U.S. Global Jets ETF (NYSE: JETS). Airlines have only recovered about half of the pandemic-driven sell-off, as you can see in the chart below. And prices are consolidating near the key 50-day moving average, which is the green line.
That sets up the next breakout move higher because a combination of pent-up demand and herd immunity means that airlines will recover quicker than expected.
That’s why airline stocks will be the next industry to surge higher in 2021 as other investors start to realize this massive mispricing.
Research Analyst, The Bauman Letter
P.S. There is another sector we expect to surge higher this year. And it could hand investors the keys to endless income. Ted tells you all about it here.
What Do YOU Say?
Welcome to our first poll of 2021, where you get to weigh in on the important topics.
Yesterday, Ted talked about Wall Street’s Boogeyman: Inflation!
Will we see inflation in 2021? Yes!
Will it be bad for your investment portfolio? Well, that depends, as Ted explained.
So, we’re curious: Does the inflation boogeyman keep you awake at night along with Wall Streeters and CEOs?
Click below to let us know.