This time of year my inbox is full of investment outlook pieces from all the major investment management firms, including LPL. Below is a link to the LPL 2021 outlook. Today we want to summarize some of the more prevalent themes in the majority of our investment partners’ perspectives on the coming year and we would encourage you to read through LPL’s look forward.
Topping the list is Covid-19 and the vaccination regimens. The different vaccines against coronavirus that have been recently approved are a definite positive for the global economy. The logistical challenge of getting them distributed and getting individuals inoculated will have its ups and downs but on balance, it should be a tailwind for markets and investors, and should lead to economies opening back up gradually and more robust economic activity, particularly in the second half of the year.
Strong central bank support is another consensus topic. Nobody seems to think any central bank around the world will pull its horns in any time soon and make a change toward more restrictive monetary policy. The Fed and the ECB met this week and last week, respectively, and basically told the world interest rates would be lower for longer and stimulus, in the form of asset accumulation, would continue for the next few years.
China reset is another topic that is commonly mentioned. With a new administration in Washington, the thinking is that surprise tariffs and threats of further trade restrictions will no longer dominate the news. That doesn’t mean, however, that there is an expectation that it will be all roses and cupcakes for US – Chinese relations. Most analysts expect the US will continue to challenge the Chinese tech and finance sectors and we have just seen new regulations come into play that could keep some Chinese companies off the US exchanges.
Finally, two related topics tend to appear in most analysts reading of the new year: inflation & US dollar weakness. Predicting currency fluctuations is one of the toughest things to do in investing because there are so many factors to consider. However, most of the opinions we are seeing outline expectations of a weaker dollar, relative to other major currencies, going forward. The strength and/or weakness of the dollar is typically a long cycle and many analysts believe the dollar may be starting an extended trend to the downside. This would mean foreign investments, small caps and hard assets like commodities would benefit from such a trend. Curiously though, many analysts are expecting little to no inflation for the coming years, which is not typically a feature of a weak dollar trend.
Regardless of what actually happens in 2021, we will be here watching and reporting to you. Please take a look at the LPL report and as usual, if you have questions about your specific situation, give us a call.
From all the team here at EverVest, Happy Holidays and best wishes for the new year!
2021: Powering Forward: http://view.ceros.com/lpl/outlook-2021/p/1
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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