Taps Coogan – November 12th, 2020

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Kyle Bass, founder of Hayman Capital Management, recently spoke with CNBC about why he is expecting a broad based rally for stocks in 2021. Namely, he expects that the combination of big deficit spending, central bank accommodation, low interest rates, an effective vaccine, and a knee-jerk global industrial recovery will come together to make 2021 “a pretty interesting, good year.”

It’s probably fair to say that Mr. Bass’s sentiment reflects the consensus that is behind the wild moves in the market this week. As is always the case, the question for investors is how much of that consensus is already priced into markets and how much of it will actually come to pass.

There is also the following problem. If one assumes that 2021 will be another blockbuster year for stocks, it’s likely going to bring metrics like market capitalization-to-GDP to levels not seen since 1929. Where do we go from there?

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