Allianz Investment Management
While the economic outlook is fairly bleak for the coming months, we expect the economy will come out of hibernation from the virus as vaccines are distributed and the second half of 2021 should yield a strong rebound for the global economy.
Allianz Investment Management
We see U.S. growth at 3.5% to 4.5%. The progress made towards a viable vaccine combined with the likelihood of additional fiscal stimulus to bridge the economic output gap is setting up the economy for a strong rebound in the second half of 2021. Should an effective vaccine take hold in 2021, we suspect consumers will come out of hibernation and economic activity will re-open across all sectors, providing a strong tailwind for GDP in 2021.
Amundi
We believe old-fashioned geographical diversification will come back into focus, thanks to global trade no longer driving global growth, the repatriation of value chains and the desynchronisation of cycles.
Amundi
In a still highly uncertain virus and economic cycle, the Chinese and Asian economies are emerging as the most resilient, having been able to effectively manage their outbreaks. So far, China has been the only country to recover to its precrisis GDP level. The outlook of EM countries in LatAm should also improve through 2021 as the virus cycle is improving in this area. These trends should support EM regional themes and EM bonds in local currency.
AXA Investment Managers
For the coming year, changing expectations of the shape and strength of the recovery will be important in influencing returns and volatility. What we can count on is that interest rates will remain extremely low, and therefore companies and governments alike will continue to enjoy low-cost funding.
Bank of America
In the U.S., we think 2021 will be a transition year, moving back to services from goods, to private from public and to in-person from virtual. The scars from Covid will remain. We look for the economy to grow 4.5% in 2021. The first Fed hike is unlikely until the second half of 2024.
Bank of America
The U.K. has a lot to gain from a vaccine given its relatively poor economic performance. We expect a strong growth bounce mid-2021. But Brexit along with relatively large Covid scarring cuts potential growth, so the country may not return to 2019 GDP until 2023.
Bank of America
In EM, we expect consumption to drive India’s recovery in 2021. Growth in Korea is expected to rebound to 3.4% after a relatively modest recession in 2020. Vietnam, Malaysia and Singapore likely to outperform Indonesia, the Philippines and Thailand. In emerging EMEA, we forecast regional GDP growth to improve to about 3.5%. We forecast LatAm GDP growth to rebound to 3.8% in 2021 after a decline of 7.4% in 2020.
Bank of America
BofA economists and strategists predict global GDP to surge 5.4% (best since 1973).
Bank of America
After -7% this year, we expect the euro area to grow 3.9% and 2.7% in 2021/22—an incomplete recovery leaving scars and imbalances. The ECB will be moving into yield-curve-control of sorts.
Bank of America
Japanese growth is poised to slow in the near-term due to the Covid-19 third wave. But the recovery has room to run in 2021. Weak inflation means that BOJ policy is frozen for the foreseeable future.
Bank of America
In China, we expect economic activities to normalize further and maintain our GDP growth forecast at 8.5% for 2021. Investment will likely remain strong, along with a full-swing comeback in consumption.
Barclays
We expect the global economy to grow 5.6% in 2021, after contracting 3.6% in 2020. We forecast 4.3%, 4.6% and 8.4%, respectively, next year in the U.S., Europe and China, as the global economy emerges from Covid’s shadow.
BCA Research
At the beginning of 2021, global growth should remain volatile. However, the recovery will ultimately strengthen over the remainder of the year thanks to the rollout of vaccines, the sustained fiscal support across major economies, the continued positive impact of China’s economic healing, and the strength of household balance sheets.
BCA Research
The U.S. will grow faster than potential thanks to the policy backdrop. Outside of the U.S., China’s stimulus and an inventory restocking will fuel a continued upswing in the global industrial cycle that will push 2021 GDP growth well above trend. However, at the beginning of the year, we will likely feel the remnants of the lockdowns currently engulfing Western economies.
BlackRock Investment Institute
We are turning more pro-risk tactically in 2021 by adding equities to our overweight in credit as we see the economic restart re-accelerate.
BlackRock Investment Institute
We are underweight minimum volatility stocks. We expect a cyclical upswing over the next six to 12 months, and min vol tends to lag in such an environment. We are overweight quality. We like tech companies with structural tailwinds and see companies with strong balance sheets and cash flows as resilient against a range of outcomes in the pandemic and economy.
BlackRock Investment Institute
We have downgraded European equities to underweight. The market has relatively high exposure to financials pressured by low rates. It also faces structural growth challenges, even given potential for catch up growth in a vaccine led revival.
BMO Global Asset Management
Though it may take a few months to get the pieces in place for a pronounced recovery, we are optimistic that this can happen in 2021. In terms of positioning, we expect accommodative policy and a vaccine driven recovery to support risk assets. As a result, we are currently overweight U.S. and emerging-market equities and underweight fixed income.
BMO Global Asset Management
Emerging markets also look poised to benefit from a global economic recovery in 2021, with rates of growth again superior to those of developed markets.
BMO Global Asset Management
We continue to have a favorable view on equities for 2021 due to our expectations for a vaccine-driven economic recovery and revitalized global corporate earnings
BNP Paribas
A widely distributed vaccine will enable corporates and consumers to envision a post-Covid world at last, we expect, and revive investment and spending plans. This sets the stage for a strong economic recovery, and we forecast global GDP to grow by 5.6% in 2021.
BNP Paribas
Monetary policy is likely to remain exceptionally accommodative, reflecting an asymmetric reaction from central banks in which they will be quick to respond to negative news but cautious in responding to positive developments. We expect this, along with an expansionary fiscal stance, to support economic activity.
BNP Paribas
China stands out from the rest of the world, in terms of both growth and monetary policy. We expect GDP growth of 8.6% in 2021 and 5.3% in 2022, with the authorities balancing liquidity availability against financial risk control.
BNY Mellon
With the U.S. labor force under great pressure, we expect recovery to be slow as a supply-constrained economy experiences bottlenecks. Lower productivity is priced through deeply negative real interest rates.
BNY Mellon
The euro zone’s response to the pandemic has slowly but surely taken a pro-growth and investment direction. The NGEU recovery plan, supported by EU-issued bonds, is a sign that the ghosts of austerity may have been laid to rest. European reflation may finally have a chance.
Citi
The outlook for 2021 is quite good in economic terms (GDP rising 4.9%) and unemployment falling with recovered hiring intentions. The key question is how much of the market returns have been pulled forward and we suspect a great deal.
Citi
We (still) see mainly upside risks to consensus projections for growth and inflation and expect that Fed policy will be slightly more-hawkish than most anticipate. We project 5.1% year-on-year real GDP growth, a core inflation overshoot followed by ~2%YoY core PCE and that the Fed will taper asset purchases in Q4 2021 and may raise rates as early as December 2022.
Citi
Next year, in our view, the EM vs. DM equity trade may be supported by significant tailwinds, such as global trade volume growth recovery, weaker dollar dynamics and relative valuation that supports the view for regions such as Latam and CEEMEA to “catch up.”
Citi Private Bank
Although the vaccine cavalry has arrived, we need to understand the safety and longevity of the vaccines themselves. With a new U.S. government, there is hope for more normalized trade and international relations, but the very composition of governments from the Americas to China to Brazil may limit the ability to achieve much. And without sustained low rates, the recovery itself may be imperiled.
Columbia Threadneedle
Following unprecedented levels of stimulus and government intervention the level of debt is going to be even greater than it was after 2009 and we will emerge into a world of low inflation, low growth and low interest rates—such a backdrop is not one where traditional value investing is likely to outperform over the longer term. We would therefore caution against a rush to value and poorly performing stocks irrespective of the outlook, and would also caution investors about value traps.
Credit Suisse
We are positively inclined toward economically-sensitive groups, and believe their momentum should persist over the near-term. However, the greatest sequential improvement in economic activity is well behind us and moderating.
Credit Suisse
Non-cyclicals should lag in an improving economy as falling volatility supports higher P/Es for riskier assets, and rising rates makes their high dividend yields less appealing. The one exception is health care which should outperform given a more robust earnings trend.
Evercore ISI
2021 top line growth, driven by a rebound in consumer spending on services should be strong than currently expected. Split government in the U.S. limits the scope for changes to the tax code. Borrowing cost remain near all-time lows. Rapidly recovering earnings growth and management sentiment toward cash return will help boost buyback activity over the next year. Taken together, those forces leave us with a 2021 EPS estimate of $176, about $10 above current consensus.
Evercore ISI
Though vaccine deployment will help boost the global economy, emerging markets are a particular source of strength. Increased business investment and replenishing of still low inventories will boost activity in the world’s manufacturing hubs. Commodity prices are starting to reflect that shift. We favor mature growth cyclicals (Industrials, Materials, Energy) and emerging markets in 2021.
Fidelity
Overall, we view risks to global growth forecasts (5.4% according to the latest IMF projections) as balanced, but remain alert to the risk of a double-dip recession in the U.S.
Franklin Templeton
We are optimistic in emerging-market (EM) debt, which we believe is a highly undervalued space. Despite the enormous medical and fiscal challenges EM countries face, the steadily increasing probability of a global economic recovery will entice investors into EM debt.
Franklin Templeton
We see a synchronized global recovery gradually unfolding, supported by the vaccines and the lagging impact of massive monetary and fiscal stimulus. All of this should continue to reward global small caps -and cyclicals in particular.
Goldman Sachs
With a favourable growth/inflation mix and still elevated equity risk premia we are overweight equities and underweight bonds.
Goldman Sachs
As the economic recovery consolidates next year, we expect to see more differentiation across the curve, with policymakers committing to keeping front-end rates low, but higher expectations for real growth and inflation driving long-end rates higher.
Goldman Sachs
Downgrades to U.S. growth expectations on the back of new covid restrictions would likely restrain pro-cyclical trades, especially longs in breakeven inflation and nominal rate payers. Recent market shifts mean that some upcoming weakness has now been priced in Europe and energy markets, but less clearly elsewhere.
Goldman Sachs
Our forecasts are for a relatively modest increase in yields and are driven by a further upgrade to the U.S. outlook. Historically, cyclically-driven yield increases are generally not a sustained headwind for risk markets. With a firmly dovish Fed, the mix of growth and rates that we forecast remains a very favorable one. So we think the significance of rate shifts for other assets may be felt more in “rotations” than at the headline level.
Goldman Sachs
Unlocking the upside in European assets requires higher domestic and global growth, and markets will likely question that upside until local outbreaks ease.
Goldman Sachs
Our China team’s growth expectations of 7.5% real and 10%+ nominal sets us up for a period of solid outperformance that we think is still underappreciated by asset markets.
Goldman Sachs
A stronger recovery next year may also bring its own risks. In credit markets, a more powerful growth impulse and further gains in equity markets over the next year could bring “releveraging” risk more firmly into focus.
HSBC Asset Management
We expect to face an intensified regime of lower-for-longer expected returns, which requires careful navigation. Therefore, a phase of economic restoration is more realistic than a rapid reflation scenario.
ING
On the European side, we forecast 10-year EUR swap rates to rise to only 0.05% next year, equivalent to -0.25% for 10-year Germany. Inflation is going nowhere fast, ECB demand for bonds continues to grow, and fiscal stimulus is insufficient to boost long-term growth expectations.
JPMorgan
In U.S. investment grade, the team forecasts tighter 2021 year-end spreads at 125 basis points for a total return of 1.7%. Drivers include stronger economic growth, supportive fiscal/monetary policy, lower net issuance, a lower amount of fallen angels and ongoing low FX hedging costs.
JPMorgan
In U.S. high yield, optimism remain heading into 2021 given the expectation for an extension of the current economic recovery matched with only a limited rise in Treasury yields. HY spreads are forecasted at 450 basis points by year-end equating to a full-year return of 7.5%.
JPMorgan
JPM expects the level of global GDP to remain about 3% below its pre-crisis trend, which represents a larger shortfall at a similar stage of any recovery over the past 50 years. Hence why we project sub-target inflation in all DM economies plus China next year.
JPMorgan
With monetary options limited (JPM expects $5 trillion of balance sheet expansion in 2021 compared to $8 trillion in 2020) and fiscal policy delivering drag of 2% of global GDP next year, meaningfully higher inflation is a risk scenario rather than a baseline.
JPMorgan
Treasury yields are projected higher, as large-scale fiscal stimulus and widely available vaccines drive better growth outcomes in the second half. Treasury 10-year yields are forecast to rise to 1.1% in the second quarter and 1.3% in the fourth quarter. 3s/10s steepeners are recommended.
JPMorgan
The backdrop of globally synchronized expansion, legislative gridlock and positive vaccine news should be a strong catalyst for value stocks, which have been beaten down due to the Covid crisis. By contrast, momentum/growth stocks should lag. We see value converging to the upside as opposed to momentum converging to the downside.
JPMorgan Asset Management
International growth will depend on regional pandemic trends early in the year but should broadly accelerate once vaccines are distributed. In addition, a more predictable trade policy from the incoming Biden administration and stronger international economic growth should push the U.S. dollar lower.
JPMorgan Asset Management
Once investors feel more confident about the global recovery, cyclical regions should outperform more defensive ones. This suggests strong performance ahead for Europe, Japan and non-North Asia emerging markets. This catch-up began in November.
Lombard Odier
We expect an uneven recovery, with some sectors (housing, goods, production, trade) outperforming others (services, financials and energy).
Lombard Odier
Inflation should recover but remain below target. Activity pick up should help lift prices but labour market slack should prevent an overshoot.
Mizuho
The road to unencumbered activity and travel resumption associated with ~60-70% global herd immunity is two-three quarters away.
Morgan Stanley
Stronger growth, higher inflation and a weaker dollar are offset by bottom-up fundamentals that remain soft in most markets. Supply/demand dynamics are supportive in copper and natural gas, and more negative in oil and iron ore. 2021 may be a turning point for gold, and we revise our price forecast lower.
Morgan Stanley
2020 witnessed once-in-a-century swings in the economy, policy and markets. 2021 will bring more normality. Trust the recovery, and the post-recession playbook. Overweight global equities and credit, funded by an underweight in government bonds and cash. Commodities lag other risk assets, as mixed fundamentals drive dispersion. Dollar to weaken, volatility to fall.
Morgan Stanley
With the Fed on hold until late 2023 and a continued V-shaped recovery, investors should follow the portfolio balance channel. We recommend investors go down in quality and up in risk across the securitized space; we expect higher-yielding, lower-rated sectors to outperform less risky assets.
NatWest
The current recovery is fundamentally different, and more inflationary, than in 2008. The foundations for higher inflation were in place before Covid-19—the crisis is likely accelerating the trend. Inflation markets don’t price this.
NatWest
A vaccine should spark a slow, steady recovery for the global consumer next year. This is a better backdrop for emerging markets, although a uniform rally is not likely. Sectors like transport and banks, and commodities like oil, will benefit from a more confident consumer.
NatWest
Global growth prospects are good, but the U.S. will lag, Fed policy will remain easy and the dollar is expensive. EM FX is set for a better year, especially for countries with solid foundations for better growth.
NatWest
Steeper curves are likely. Bonds are too pessimistic about the impact of fiscal policy on curve shape, especially in Europe. Fiscal deficits will remain loose and supply will remain far larger than in pre-crisis years. The euro area should lead the 2021 recovery.
Neuberger Berman
The recession caused credit spreads to widen. Rapid and substantial central bank intervention made this an exceptionally short-lived phenomenon, however, leaving investors with a highly complex mix of early- and late-cycle characteristics, and default and valuation risks. We think this demands a flexible, “go-anywhere” approach to credit.
Neuberger Berman
With rate volatility suppressed, worldwide growth and inflation differentials are more likely to be expressed through currency markets. Heightened currency volatility and the end of persistent U.S. dollar strength would strengthen the case for dynamic currency hedging.
Neuberger Berman
Early-cycle dynamics will likely favor cyclical stocks as economic growth accelerates, but ultimately, we believe the looming backdrop of secular stagnation—characterized by low rates, low growth and low return outlooks—will lend support to growth stocks and long-duration assets. It remains important to diversify across style factors.
Pictet
Our business cycle indicators point to to mid-single digit growth in world GDP in 2021, but positive base effects cannot hide the long-lasting damage caused by the pandemic. We estimate that the fallout from Covid-19 will permanently reduce global GDP by 4 percentage points. It will take years before we get back to pre-Covid-19 levels.
Pictet
The world’s recovery from the Covid-19 pandemic should provide a strong boost to global stocks, which should gain 10-15%. But those gains will mask a significant divergence in the returns of regional markets.
Pictet
The surge in GDP growth is unlikely to lead to a sharp sell-off in developed market government bonds. That’s primarily because central banks won’t take any unnecessary risks.
Pictet
The combination of strong growth and rising commodity prices will feed through to a moderate pickup in inflation expectations. We expect Treasury Inflation-Protected Securities (TIPS) to outperform all developed market nominal bonds.
Pictet
In a year that will see healthy global growth and increased international trade, emerging-market local currency bonds should also fare well. Adding to their investment appeal is the prospect of a strong rally in emerging market currencies, which should unfold as the global economy recovers and as trade tensions ease under a Biden administration.
Pimco
We believe it remains critical to build resilient and diversified portfolios that can withstand a range of economic scenarios. We see two primary risks to our positioning—lower growth and higher inflation—and we are focused on hedging against these.
Principal Global Investors
Asian economies were much quicker to learn how to live alongside Covid-19 without inflating its spread, and as such, these markets stand to gain the least from the eventual vaccine rollout.
Robeco
Looking ahead to 2021, the upside of additional fiscal stimulus—bringing the economic recovery forward in time by additional government spending—clearly outweighs the downside: higher government debt levels. Central banks facilitate ongoing fiscal spending by keeping policy rates at the effective lower bound. Advanced economies return to pre-pandemic output levels by the end of 2021.
Robeco
With the vaccine and both fiscal and monetary stimulus facilitating further economic recovery, the rebalancing of commodity supply and demand that started a couple of months ago continues. Demand for base materials driven by China in particular increases, pushing prices higher. We see OPEC+ increasing production slowly, matched by a return in demand and providing decent upside for oil prices.
Societe Generale
Reduced currency risks and accelerating growth in Asia (more than 80% of EM equities are in Asia) make us even more optimistic on EM equities. We still really like China equities for the long term, but are even keener on some laggards (Korea, Indonesia).
Societe Generale
In Asia, a stronger growth profile coupled with lower valuations could lead to Asia ex-Japan continuing to outperform global peers. With growth momentum shifting to cyclicals, along with a resilient technology cycle, our models estimate higher upside for cyclical markets such as Korea and Japan and a more in-line market performance from greater China.
TD Securities
With the global economy operating well below potential and inflation pressures muted, central bank taps will remain open for years to come, while fiscal stimulus is only gradually withdrawn. The balance between fiscal and monetary policies in supporting the recovery will be key.
TD Securities
Our expectation is broadening vaccinations in DMs in the spring, which lead to “behavioral immunity” in the second half of 2021 when economic activity is able to rapidly rebound, with most EMs likely more of a 2022 story.
TD Securities
As we approach year-end, it’s clear that early momentum is fading and only in the second quarter of 2021and beyond do we expect growth to pick up materially.
TD Securities
The first half is set up as yet another which could see worse labour market data on the ground but higher returns in risk assets. But the second half of the year may underwhelm those expecting surging economic growth to translate into easy gains as PMIs decelerate, reflation flatlines, and term premium and policy rate expectations drift higher.
TD Securities
If the recovery in economic growth is even stronger than we expect, we are likely to see rotations out of sovereign debt into credit. EM hard currency is once again a beneficiary along with the broad credit complex, and this would likely see investors legging into small EMFX long positions in anticipation of a broader move.
TD Securities
The dollar could benefit early in 2021, reflecting Covid-inspired global growth downgrades. Risk assets are priced for peak optimism, increasing near-term drawdown risk. Still, we expect the dollar secular downtrend to persist, reflecting vaccines and eventual behavioral immunity that reinvigorates the reflation trade.
UBS
We expect the U.S. dollar to weaken in 2021 due to a recovering global economy, and a diminished interest rate differential. To position for this, we think investors should diversify across G-10 currencies or into select emerging market currencies and gold.
UBS
We expect the wide-scale rollout of a vaccine in the first half of 2021 to enable global output and corporate earnings to return to pre-pandemic highs by the end of the year.
UBS
Going into 2021, we prefer Value over Growth over Defensives. This is a tactical view. We are watching for a peak in inflation expectations to move back to a preference for Growth. Small Cap vs Large Cap is likely a better way to gain exposure to the recovery than Value vs Growth.
Vanguard
In China, we see the robust recovery extending in 2021 with growth of 9%. Elsewhere, we expect growth of 5% in the U.S. and 5% in the euro area, with those economies making meaningful progress toward full employment levels in 2021. In emerging markets, we expect a more uneven and challenging recovery, with growth of 6%.
Vanguard
We anticipate a cyclical bounce in consumer inflation from pandemic lows near 1% to rates closer to 2% as spare capacity is used up and the recovery continues. However, as growth and inflation firm, and as the immunity gap closes, an “inflation scare” is possible. A risk is that markets could confuse this modest reflationary bounce with a more severe but unlikely episode.
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