BlackRock Published Its Predictions For 2021 And Uber Is Selling Its Self-Driving Unit

BlackRock Published Its Predictions For 2021 And Uber Is Selling Its Self-Driving Unit

about 3 years ago3 mins

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The world’s biggest investment manager BlackRock washed its hands of this year for at least two “Happy Birthdays” this week, and went on to reveal its investing predictions for 2021 🔮

What does this mean?

In an opinion that isn’t all that controversial, BlackRock reckons the distribution of coronavirus vaccines next year will accelerate economic recoveries around the world. And since that means governments, companies, and individuals can be more confident in a post-pandemic economy, BlackRock’s looking past the near-term economic challenges still to come and feeling more positive about the next twelve months 📆 In fact, the company reckons the shock of the pandemic on economies and markets has more in common with the temporary impact of a one-off natural disaster than, say, the lasting effects of the 2008 financial crisis. That’s made the investment manager more upbeat about riskier investments like stocks, and less interested in safer bonds.

US GDP shortfall after the GFC vs. estimated loss from the Covid shock
Source: BlackRock

Why should I care?

For markets: Stocks, drugs, and rock and roll.

BlackRock is particularly keen on US stocks, especially those in the tech and healthcare sectors that have benefited from the surges in ecommerce, remote working, and medical innovation 🇺🇸 It also thinks those with smaller market values – which are more sensitive to the improving economic growth outlook – should outperform bigger ones. The firm has a few picks outside the US too: it’s backing emerging market and Asian stocks, even as it warns investors to stay clear of Japanese and European companies.

MSCI All-Country World equity sector return on equity, November 2020
Source: BlackRock

The bigger picture: Live fast, die young.

It’s worth pointing out that BlackRock’s prediction is a “tactical trading view” – a 6-12 month outlook based on anticipated market trends 🤔 In the longer run, BlackRock actually thinks stocks are too expensive, and that companies will struggle to grow profits and dividends after next year’s done and dusted.

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Uber Is Selling Its Self-Driving Unit

Uber image

Uber’s confident it’ll move faster without all these unnecessary extra features: the ride-hailing company announced late on Monday it’ll sell its self-driving business to self-driving startup Aurora 🛣

What does this mean?

Uber took an early lead in the race to develop autonomous vehicle technology when it started the segment four years ago, but it’s faced major struggles – including a lawsuit over alleged technology theft and a fatality caused by one of its cars – ever since 🚘 Combine that with the high costs of running the business, and Uber figured it was time to quit while it was behind. It’ll swap its operations for a 26% stake in Aurora in a deal that values Uber’s autonomous driving unit at roughly $4 billion. That’s a healthy sum, sure, but it’s a big step down from the $7.5 billion it was estimated to be worth last year…

Why should I care?

For markets: Ride-hailing those coat-tails.

Uber had been hoping to hit profitability by the end of 2020, but that was before the pandemic arrived. Now the company seems to be chasing that dream by doubling down on the sale of non-core, cash-burning segments – with air taxi business Elevate next on the chopping block 🔪 But these deals are more than just a way to save money: Uber’s stake in Aurora sets it up for a big payday if the startup becomes profitable – a potentially savvy bit of dealmaking that investors also saw when it sold its electric bike division to scooter company Lime.

The bigger picture: Good for the goose, not for the gander.

Speaking of electric wheels, Tesla announced on Tuesday it’ll sell $5 billion worth of new shares to cash in on its high share price following its 650% rally this year – the second time it’s done that in three months ⚡️ More shares in the market does mean, of course, that current investors’ shares will represent a smaller proportion of ownership in the company, which might be why Tesla’s stock was initially down 2%.

Tesla stock
Source: Google Finance


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