Wells Fargo Securities’ Chris Harvey is out with the bank’s top 10 predictions for next year.
No. 1 on his list: Tesla becomes the new AOL.
“It reminded us so much about 1998 — the late ’90s,” the firm’s head of equity strategy told CNBC’s “Trading Nation” last week. “AOL, similar to Tesla had a game-changing technology, incredible performance [and] it goes into the [S&P 500] index late in the year in December after an amazing run. But it was a seminal event.”
AOL, the former king of media, saw its influence unravel because it failed to keep up with the rapid pace of technology. Harvey warns that the electric auto maker could suffer a similar fate. His warning comes as Apple looks to take on Tesla by producing its own self-driving vehicle by 2024.
“After ’99, many tech and growth companies lost 50% to 100% [of value],” said Harvey. “We’re thinking in 2020, everything happens much faster. So, if it took 12 months for the end to begin, now it’s going to take six months.”
Tesla stock has surged almost 700% this year.
Its record run is one of the reasons why Harvey tells clients to avoid thinking about growth at any price.
“They need to start looking at cyclicality. They need to start thinking about getting more high Covid-beta names in their portfolios,” he said. “Old economy, not new economy.”
And, that sets up No. 2 on Harvey’s list: Stocks with ugly charts start to prevail.
“You really want to look for those really beaten-up, less picked over stories where the chart actually looks broken.” he said.
According to Harvey, next year’s winners will look a lot different than 2020’s. He sees investors beginning to lose interest in growth and momentum stocks as economically sensitive areas catch a bid from renewed economic growth.
“Stocks that went up continued to go up, and what we think is there’s going to be a regime change,” said Harvey, adding 2020’s recessionary environment looked a lot like 2003 and 2009 when investors ran to growth plays.
His third prediction: Republicans will split the Georgia runoff, and retain control of the U.S. Senate.
“The polls are telling us it’s a pretty high probability,” Harvey said. “It’s very good if they do retain control of the Senate for the equity markets.”