It is always difficult to predict what is going to happen. Who would have predicted the pandemic, and the variety of responses, in 2020? Returns in 2021 are likely to be just as interesting. Events like the pandemic come and go but returns over the longer term are almost always positive. That said, and depending on your timeframe, the starting point is important.
Near term returns can move around a lot. They are very dependent on what governments and ‘experts’ say and do, and reactions to such. Governments are expected to keep interest rates low in the foreseeable future. They are hoping to fuel a recovery in earnings, which in turn should lead to employment and economic growth. Along with additional policy stimulus and increasing vaccination growth is expected to increase over time. On a positive note, the IMF (International Monetary Fund)1 recently raised its global growth forecast for 2021 to 5.5% from the 5.2% it anticipated back in October.
However, given what is considered to be current, by historic measures, high prices in both shares and bonds (low-interest rates) performances in 2021 could be up or down. Issues or events that could affect this year include developments around US policy, ongoing tensions between the US and China, the approach towards Iran, the level of global trade and initiatives adopted that might address climate issues. On top of all that no doubt developments around the virus will continue to have a big impact. In this environment, it pays to tread carefully / invest wisely. Our strategy remains to endeavour to participate well in the current market rally, while still preserving some measure of downside protection against what we believe to be “frothy” markets.
- The International Monetary Fund (IMF) is an organisation of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.