The stock market remains the preferred target for investments in 2021: emerging markets, technology and health care should be the best performing sectors. Broadly speaking, this is the scenario designed in the 2021 outlook by Didier Saint-Georges, managing director and member of the investment committee of Carmignac.
During the presentation of the 2021 outlook, the Carmignac analyst underlined the significant progress made by the Eurozone and United States economies in the second half of the year, respectively + 61.1% and + 33.1%, but also that the levels preceding the Covid crisis still remain distant. Support from fiscal and monetary stimulus will therefore still be needed.
The fiscal support, strongly requested by the Federal Reserve, is borne by governments and leads to a continuation of the increase in public debt: this appears problematic not only for the United States, but especially for European nations such as France, Spain and Italy. Fundamental in this regard will be the resources made available by the various funds created at European level, such as the Recovery Fund.
Monetary support, on the other hand, calls into question the central banks, whose action will remain indispensable. The ultra-expansive monetary policy of the ECB and the Fed and the very low interest rates “throughout 2022 at least are essential to support many companies affected by the lockdowns activated to combat the spread of the coronavirus”.
Where to invest in the stock market in 2021: growth stocks and emerging markets
Shifting the focus on the markets, Saint-Georges offered three main indications: equities remain the market in which to invest and seek returns, with an expressed preference for growth stocks, that is, the sectors that have benefited from the changes brought about by the pandemic. Technology and health are the favored sectors.
But be careful, the game has become more difficult and “now it will be even more important to select companies capable of exploiting the recovery and with better balance sheets than before the crisis”.
Emerging markets will remain attractive despite their economies certainly not being untouched by the coronavirus crisis. However, it must be said that in many cases the problem has been better addressed and, above all, the fiscal and monetary support activated by many governments in emerging countries has been lower when compared to that in developed economies. Support for the economies and emerging markets will come in particular from the export front, also helped by the expected weakening of the US dollar, which Didier Saint-Georges confirms.
Finally, gold could continue to appreciate also in 2021. In addition to the classic role of safe haven in conditions of uncertainty, the forecasts of a decline on the US dollar will also play in his favor.