Marc Jones and Sujata Rao of Reuters examined the big 5 investment houses expectations for 2021 and the themes are:
Will the US dollar fall in price? When the Federal Reserve cut interest rates to 0% for many good reasons, it kicked away the dollar’s yield advantage over its peers. As long as COVID is a major concern, the government will need to intervene in the economy and that means more debt.
Re-emerging Markets – developing countries would see a benefit from recovering global trade, tourism, commodity prices increasing, a weaker US dollar and predictability in the White House. Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of America are overweight emerging markets.
Central Banking on it – everyone believes central banks around the world will keep interest rates low. Central banks worldwide spent $1.3 billion a hour since March on asset purchases. There were 190 rate cuts or one every 5 trading days, says Citibank.
JP Morgan estimates more than 80% of sovereign bonds from richer countries pay negative yields after factoring in inflation. Blackrock says to underweight the sector.
ESG: Here for Good the assets of investment funds adhering to Environmental, Social, and Governance (ESG) double this past year to $1.3 trillion. The pace is expected to increase.
2/3’s of ESG fund assets are in equities, but sustainable debt has grown 20% in 2020 to more than $620 billion.
Biden on tech – there may be a love hate relationship with tech under President Biden. In some areas Big Data, 5G, artificial intelligence, electric vehicles, robotics and cybersecurity President Biden’s policies may be just as combative as President Trump’s were.
Tech and e-commerce account for almost a 1/4 of US corporate profits and tech makes up 40% of MSCI’s emerging equity index.
Linking to dividend paying stocks, the trend in your life are shared with the rest of the world, what is important is what you do with it. We know that interest rates will be low because the recovery is a K shaped with many people benefiting and not benefiting from COVID recovery, the government has to ensure those benefiting continue to and those not benefiting are in position to do something when COVID is under control. Ideally in your portfolio are companies which try to stay within the law and continually make profits to pay dividends. If they are doing that you can sleep well at night.
There are more questions than answers, till the next time – to raising questions.