2021 Market Outlook

February 26, 2021 - In case you missed the most recent edition of Insights, our quarterly newsletter, here’s our current market outlook.

ECONOMIC OUTLOOK: We anticipate above average economic growth.

  • Consensus forecasts for real GDP growth suggest global growth in 2021 will be in the range of 5.0% to 6.0%, reversing an estimated 2020 deficit of -4.0% to -4.5%. Developed economies overall are forecast to grow by 3.5% to 4.5%, with the U.S. expanding by 3.0% to 4.0%, the Euro area by 3.0% to 5.0% and Japan 2.5% to 3.0%. Growth in emerging and developing countries is expected to outpace developed markets, averaging between 5.0% and 7.0%, with China growing 8.0% to 9.0% and other emerging markets countries collectively adding over 5.0%.

  • Interest rates are globally forecast to remain “lower for longer” with virtually no chance of central banks raising short-term rates in 2021, yet we do not rule out a moderate rise in interest rates later in the year as economic conditions and demand improve.

  • We expect unemployment will continue to exceed historic averages but show steady improvement throughout 2021 as economies begin to open more fully. However, we don’t anticipate employment returning to pre-pandemic levels until at least 2022. Forecasts call for the unemployment rate in developed markets, including the U.S., to average about 7.0% and for lower unemployment rates in China (3.6%), Japan (2.8%) and other Asia Pacific countries. Despite high unemployment in the U.S., consumers overall are relatively healthy, with higher personal savings and net worth than before the pandemic.

  • We believe inflation will remain low in the near-term as below average consumer demand, low energy prices and high unemployment hold prices down. But with markets awash in liquidity, it would not be surprising to see inflationary pressures pick up as economies recover and demand accelerates.

CAPITAL MARKET OUTLOOK: We are generally constructive on capital market performance.

We think progress in bringing the pandemic under control, continued policy support, corporate earnings growth and low interest rates will combine to provide a conducive environment for “risk” assets like equities and credit-oriented securities, at least in the near term. However, we think it’s likely that economic recovery will be slow and uneven, with periodic spikes in volatility along the way.