4 things you need to know if you’re buying US shares in 2021

Posted: 14 December 2020 10:07 am
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There's more than just a pandemic to think about if you're trading on Wall Street.

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Thinking of investing in US stocks in 2021? Before buying stocks in any company, it pays to stay up to date with trends that are moving the markets — especially when it comes to Wall Street.

From major upcoming IPOs to the continuing election fallout, let’s take a look at four major factors you’ll need to consider if you’re buying US shares in 2021.

Major IPOs

2020 has already been a huge year for IPOs — and we’re not done yet. With major names like Wish, DoorDash and Airbnb all featuring on the list of December IPOs, 2020 is going out with a bang.

Fast forward to 2021 and there are several eagerly anticipated IPOs to keep an eye on.

Bumble, a dating app that lets women make the first move, announced its plans to go public back in September. Backed by private equity firm the Blackstone Group, Bumble could list as early as Q1 and Bloomberg is reporting it could seek a valuation of $US6 billion to $US8 billion. Investors will be hoping Bumble enjoys similar success to Tinder, whose parent company Match Group (MTCH) has risen more than 600% since going public five years ago.

Grocery delivery app Instacart has enjoyed a boom year thanks to COVID-19, experiencing a 500% increase in order volume at the height of the pandemic. The company has since expanded its offering to the delivery of non-grocery items, such as goods from Walmart and 7-Eleven, and Goldman Sachs will lead its 2021 IPO at a valuation of US$30 billion.

Robinhood, a zero-fee stock trading app for novice investors, is also making waves. Another company to experience a boom year on the back of the pandemic, Robinhood increased its user base from 10 million to 13 million in 2020. Bloomberg has reported that the company could go public as early as Q1 next year, while Robinhood recently chose Goldman Sachs to lead its IPO.

Throw in a sizable dose of speculation about whether digital payments provider Stripe will finally announce plans to go public and 2021 is shaping up to be a big year.

Continuing election fallout

The recent US election was one of the biggest stories of 2020 for a number of reasons. But as the transition to the Biden administration continues, investors can start to look ahead to what this means for the US economy.

One key policy area appears to be the environment. Not only does the incoming president plan to rejoin the Paris climate agreement, he also wants to see the US reach net-zero carbon emissions by 2050. This has led to speculation that stocks in renewable energy sectors — electric vehicles, batteries, solar power and more — could stand to benefit.

However, that doesn’t mean we should expect any major changes. As things stand, it looks like President Biden will be faced with a split Congress, so his ability to successfully introduce climate-related legislation or tax changes will be limited. Biden’s proposed corporate tax increases look unlikely to pass the Senate, which could spell good news for a range of stocks.

The balance of power is also expected to affect the size of any additional economic stimulus package Biden may introduce, a subject that is currently the topic of plenty of debate between Democrats and Republicans.

Exactly what effect this will have on the US economy in 2021 remains to be seen. However, stocks historically perform better under a divided Congress, so it’ll be interesting to see how the market performs in the coming 12 months.

Trade relations with China

A thawing of US-China relations could be another consequence of Joe Biden’s election win

Under Trump, the relationship between the two superpowers quickly soured, resulting in a trade war. The impact was soon felt on the stock market, with US tariffs on Chinese imports causing US companies to lose at least $1.7 trillion in the price of their stocks.

President Biden is expected to adopt a much more collaborative approach compared to Trump’s hardline stance, but that doesn’t mean the rivalry between the two nations is just going to disappear.

According to analysis from the Australian Strategic Policy Institute, finding a way to “compete, cooperate and coexist” with China will be one of Biden’s major foreign policy challenges. Expect all the usual flashpoints like the “tech cold war” and the status of Taiwan to generate plenty of headlines, but analysts are predicting a general improvement in relations between the US and China.

It’s hoped that this stability will help aid America’s economic recovery following the COVID pandemic.

COVID-19

You’ve no doubt grown tired of hearing about this deadly virus for much of the year, but expect it to continue to dominate headlines in 2021. While there’s been recent positive news surrounding a vaccine, until a vaccine becomes widely available, the ability of governments around the world to control new COVID outbreaks will be a crucial factor in the global economic recovery.

In the US, the COVID situation remains alarming. At the time of writing, the virus had killed over 285,000 Americans. More than 100,000 new cases were reported each day for much of November, and several days in December have already seen over 200,000 new cases.

Despite the ongoing presence of the virus, Credit Suisse estimates that the US economy will grow 4.2% in 2021, with low inflation also predicted. But a recent survey by The Conference Board found that CEOs are divided on what shape the economic recovery will take, with 42% of US CEOs surveyed backing a U-shape recovery, 26% an L-shape and 23% a W-shape.

There’s also the question of whether the changes that the pandemic has brought to our work and social lives are here to stay. Remote working, online study, changes to the way we consume media, an increased focus on domestic rather than international travel — all of these were common themes in 2020, but how will that change once a vaccine becomes available?

Many tech stocks experienced big years in 2020 on the back of lockdowns around the world.

The so-called FAANGs — Facebook, Apple, Amazon, Netflix and Google — and Microsoft have been a driving force behind gains in the S&P 500. Can we expect that growth to continue, or will a return to something resembling “normality” shake things up once again?

After a year like 2020, let’s hope there aren’t too many surprises in store.

How to buy US shares

If you want to invest in US shares from Australia, it’s easy to do so using an online share trading platform.

However, you have a couple of different options to choose from. You may decide to create an account with a broker that specialises in US markets only, or choose a platform that offers access to the ASX as well as US stock exchanges, such as SelfWealth. SelfWealth makes it easy to trade US and Australian stocks from the one account, plus offers a USD cash account so you can save on currency exchange costs.

Use our share trading comparison table to find the right platform for your needs. Once you’ve found a broker, you can sign up for a free account by providing your personal details and proof of ID. And if you’ve thoroughly researched your investment options, you can then start trading US stocks.

Name Product Standard brokerage for US shares Inactivity fee Currency conversion fee Markets
SelfWealth (Basic account)
9.5
No
0.60%
ASX shares, US shares
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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