The 2021 outlook is generally positive because the world economy is expected to recover after a 2020 marked by the Covid pandemic, but the uncertainties on the markets are many: forecasts indicate a weaker dollar, stock exchanges and emerging markets tend to grow but with large risks. This year the answer to the question “How and where to invest in 2021?” it is more difficult than ever.
2021 will be a “year of renewal” and the world will progressively return to normal despite the continuing uncertainty, running fast towards a transformed future. If 2020 was the year of resilience, of large companies and of the United States, for investments in 2021 it will be better to focus on cyclical stocks, small companies and global lists, to take advantage of the restart of sectors and markets most penalized by lockdowns. At the same time, as the world economy accelerates towards the future, long-term-oriented investors will need to target innovative companies that make the world more digital and sustainable, particularly in the greentech, fintech and healthtech areas and in companies benefiting from the launch of the 5G.
Outlook 2021, forecasts and investment ideas
In this article I expose the main points of the 2021 outlook and of the forecasts on investments and markets, in those linked in the various paragraphs you will find the most detailed analyzes (articles in constant updating).
Economic recovery after the pandemic
The large-scale distribution of a vaccine in the first half of 2021 is expected to allow the world economy and corporate profits to return to pre-pandemic highs by the end of the year.
Investment ideas – Focus on global equities to diversify your investment portfolio for this new phase, cyclical stocks with recovery potential and long-term winners. Rebalancing portfolios by reducing exposure to US large caps and global consumer staples.
Interest rates and inflation in 2021
Analysts all agree: inflation will not pose a threat in 2021 and interest rates will remain low in the near future.
Investment ideas – Hunt for yields on select crossover bonds, emerging market USD government bonds and Asian high yield. Alternative sources of income include the sale of volatility and the use of leverage. Diversify versus low-yielding instruments such as cash and bonds.
The situation in the US in 2021
The change in political leadership should bring with it new fiscal stimuli and greater predictability of government policies, consequently modifying the market balance.
Investment ideas – Focus on US mid caps and industrial stocks, which should record higher earnings growth than US large caps. Prepare for a weakening of the dollar by taking diversified exposure to G10 currencies.
In the near future, the major asset classes should generate lower returns than in recent years. But the outlook for equities and other real assets looks more favorable than those for government bonds and cash.
Investment ideas – Investing in the next big trend by redistributing current technology exposure in favor of 5G, fintech, healthtech and greentech. Diversify into private equity by converting 20% of the equity share of the portfolio into private equity investments.