Cowen Research Themes 2021 has been published. Click here to learn about the year's key investment themes. >

Take a Look Ahead

At the start of every new year, pundits frequently try to predict what’s ahead by looking at what occurred in the past. Market gurus often look for analogs—comparisons between the current year and some past year that fit neatly into a pattern they might recognize.

So then, do the equity markets feel like 1999 or 2000? From a social justice standpoint, was 2020 a watershed year like 1968?

My answer is no. 2020 was uniquely 2020—and coming into 2021 it looks completely different than every other year in recorded history. With the first glimmers of real hope about emerging from this pandemic, and with unique dynamics around a Presidential transition, ongoing fiscal policy and extended monetary policy, can anyone really say with confidence what year 2021 will most look like?

If 2020 taught us anything it is that no one has a crystal ball. Our ability to foresee the future is highly suspect. A year ago, most of us had never heard of the coronavirus—and the disruption it caused was unthinkable. That said, we enter 2021 with a lot more knowledge than we had at the same time last year. So rather than do a recap of last year, it’s time to look—and think—ahead at what 2021 will likely bring:

  • SPACs and IPOs—A Strong Pipeline: We are entering 2021 with a robust pipeline of SPAC (special purpose acquisition company) and IPO transactions, in biotech and other sectors. Throughout 2020, companies that previously had avoided the public market realized that access to the capital markets could be the difference between life or death. Increasingly, private companies are recognizing the benefits of being public, and that access to public capital is a strategic imperative. Accordingly, we expect SPAC transactions and IPOs will continue to be strong for the foreseeable future.
  • Biotech Breakthroughs: The fast-track research efforts that led to breakthroughs in developing vaccinations to fight the novel coronavirus that causes Covid-19 has, once again, put biotech in the spotlight. We see this focus on biotech continuing in 2021, encompassing several exciting areas, beyond vaccine development and antibody treatments.  We highlight a number of these in our Cowen Research Themes 2021, but suffice it to say that we are still in the early days of the Golden Age of Biotechnology.
  • Sustainability in the Spotlight: ESG and socially conscious investing, which were on the upswing before Covid-19, continue to gain momentum. Now, with a greater emphasis on combatting climate change, our Research team has found that investors are shifting their portfolios away from carbon-intensive assets. In addition, there is increased pressure on companies and governments alike to be carbon neutral by 2050, which will likely increase spending. Those who fail to get on the ESG train pretty quickly are going to get left behind.
  • Social Justice, Equity, and Fairness Are Business Imperatives. In 2020, Corporate America engaged in frank and sometimes uncomfortable conversations around social justice, equity, fairness, inclusion, and diversity. Now, in 2021 and beyond, organizations and their leaders will likely get called out pretty quickly if they fail to put actions behind their words. Social justice, equity and fairness are not simply the right things or the moral things to do—they are imperatives because they are good for business. As business leaders and investors, we must continue to use our privileged positions not only to advocate for fairness, but to demand it. We can and should enable economic growth that is more inclusionary, particularly as we emerge into an economy with some semblance of normalcy, post-vaccination.  You can see my more detailed thoughts on this topic here.
  • Economic Help over Politics: As I am writing this, it appears as if the Democrats will control both houses of Congress, but irrespective of the ultimate outcome of the Georgia senate races, I believe we will see significant fiscal spending, including a major infrastructure bill in 2021. Republicans and Democrats alike understand the need to help individuals, small businesses, states, and localities to bridge the gap until normal economic activity resumes.

Right now, in these first few days, 2021 feels a lot like 2020—and that’s to be expected. It will take a few months for 2021 to establish its own unique place in history. But this is truly a new year with greater hope and higher expectations in many ways.

As for the markets, there will likely be volatility and sector rotation in the short term. But by focusing on some of the irrefutable trends—ESG and sustainability, combatting climate change, biotechnology, and more—there will be opportunities to pursue with the goal of outperforming over the next 3, 5 and even 10 years.

Take a look ahead.

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