Updated: Jan 4
The busy year 2020 will face soon its end and another even more challenging year 2021 is about to start. In this short article I would like to present you four trade ideas with recent risk to reward ratios, which I'm looking forward to play in the upcoming year.
Please keep in mind that you have to do your own analysis before entering trades like I do.
1. ESG driven ETFs will outperform the broader market
This is in my opinion a pretty low risk trade. Since the year 2016 we saw already massive inflows into ESG orientated ETFs and in my opinion this trend will be sustainable through 2021. To participate on this trend I will perform a spread trade. Therefore I choose to sell the SPY ETF and buy the SDG ETF in the same amount.
2. Risk premiums of US treasury bonds will slightly rise again
Basically nobody expects rising rates in the near term. I'm more sceptic about this topic and see the case that the FED has to react already in 2021 to rising risk premiums on government treasury bonds. We'll see more fiscal and monetary stimulus and therefore is the question if government debt matters anymore. If it still does, this trade would be a great play. I'm looking forward to place a short trade on US treasury bonds.
3. Gold price will face further declines after a strong 2020
If we talk about gold, we talk about a combination of inflation and real-yield expectations.
Because I see the real-yield slightly rising in 2021 I also see a weaker gold price.
Besides that the correlation between real-yield and gold price is the one you have to watch.
4. USD beats the Chinese Yuan Renminbi
The USD comes back from the dead. Tariffs between the US and China will be removed and give the USD a boost, especially against the Yuan.