2021 Economic and Investment Outlook: Investing When Decades Happen in Weeks

December 2020

2021 Economic and Investment Outlook: Investing When Decades Happen in Weeks

From the worst healthcare crisis in over a century to the quickest recovery in stock market history, the events of 2020 will leave their imprint on the global economy and markets for some time to come. In our 2021 Outlook, we take a close look at the current environment and its implications for the economy and investors as we head into the new year.

We look forward to sharing our views with you in greater detail, and we wish you and yours good health and good fortune in the year ahead and the years to come.

Key Takeaways

  • Equities: International stocks significantly underperformed domestic equities in 2020, but we believe the gap between the US and the rest of the world will likely narrow in 2021. And while growth stocks have outshone their value counterparts in the low growth/low interest rate environment, we anticipate the gap between growth and value stocks may also contract.
  • Inflation: The pandemic has seemingly increased the odds that the US will eventually experience a period of high(er) inflation, and the Fed appears to be willing to allow that to occur. We are not expecting an inflationary surge in the near term, however, but think investors should be prepared.
  • Asset Allocation and Fixed Income: Bonds play an important role in a portfolio. Yet, in an atmosphere defined by low interest rates, an increased probability of inflation, and continued uncertainty, we think additional investment tools should be considered. These include inflation-protected securities and private credit and directly lending funds along with other opportunities like private real estate, global listed infrastructure, and other return-enhancement vehicles. Selectivity will be of paramount importance, as always.