Ten Themes for 2021

To kickstart our Behind the Markets podcast in 2021, we had the pleasure of chatting with John Davi of Astoria Portfolio Advisors about the 10 themes he’s incorporating into his model portfolios for 2021.

Notable themes we discussed include:

• Commodity-Focused Equities
  • Davi likes natural resource-related stocks such as gold mines, copper mines, and international equivalents, given relatively low valuations and an uptick in inflation expectations coming out of the economic shutdown.

• Cyclical Rotation Sectors Paired with Growth-Oriented Thematics
  • Davi likes sectors like Energy, Financials and Industrials for a cyclical acceleration in 2021. Small caps are also another way he is expressing this idea.
    • After past downturns like 2000, 2008 and 2015 with Greece, the cyclical sectors tended to perform better coming out of the trough.
    • Davi thinks banks in particular bring a margin of safety, given they trade at steeper discounts to the market, and with rates climbing higher, they should perform better.
  • Davi is pairing cyclicals with growth-oriented thematic funds like Clean Energy, Genomics and Biotech to bring idiosyncratic risk to his diversified portfolios.

• China and Emerging Markets
  • While there is certainly headline political risk, Davi likes China as a long-term tactical allocation tied to the growing consumer class over next 10 years and the more technology-driven themes in China. Davi likes how China consumer names trade at a discount to the S&P 500 with superior long-term growth characteristics.
  • Regulatory risk: While China was in the news with the Trump Administration’s executive order last week, Davi sees the new administration being less motivated to raise conflict and thinks we’ll see lower pressure in trade wars.

• Alternatives
  • Davi’s ETF models include alternative assets for their hedging characteristics, and he looks for funds with negative correlations to equities. These diversifiers can be assets like gold, but Davi looks at merger arbitrage strategies and other long/short low-volatility strategies.

This was a great conversation as to how Astoria is looking at 2021 and the 10 themes guiding their allocations. You can listen to the full discussion below.