Key Highlights
- 2021 expects to see a strong rebound for the global economy
- Vaccines rollouts key to population health as well as healthier markets
- Good growth, low interest rates, improving health landscape all point to optimistic backdrop for investing
- UOBAM expects stronger performances from Asia assets
Kicking off the 2021 investment outlook Mr Anthony Raza, Head of Multi-Asset Strategy at UOB Asset Management took the opportunity to explain the current market landscape and how UOBAM is advising clients and investors on positioning their portfolios this year.
The session kicked off with a series of poll questions to assess participants’ expectations from vaccination timeline to normality to economic and earnings recovery. The general consensus from the audience expressed a cautious view with regards to the vaccination programmes and economic recovery in the US as well as that of low rates environment for the near future which was in line with the UOBAM house view. UOBAM downgraded US equities to neutral and overweight Asia for the first time in a while.
We expect 2021 to be driven based on three key factors.
Firstly, the vaccine rollout which will speed up efforts to put an end to the health crisis and lead to improved macroeconomic fundamentals.
Next, Gross Domestic Product (GDP) and earnings are expected see growth at significantly higher levels due to a low base for comparison last year. Hence when we look at individual companies or countries, we expect to see pretty healthy and strong GDP growth or earnings growth numbers.
Third, the low rates environment is likely to last for at least a couple of years which creates a conducive environment for investment in 2021.
Meanwhile, there may be also some calls for concern that will temper the risk-on sentiments. Valuations for both equities and bonds have been priced rather aggressively; geopolitical risks still remain despite the new Biden administration on the global stage; potential pandemic uncertainties stemming from distribution challenges to potential vaccine side effects or virus mutations. Inflation while benign now will impact the low-rate view.
Key calls for the year1
- Risk assets are likely to outperform – we expect investors to look past the winter outbreaks and shutdowns focusing instead on improving prospects in 2021. Our view is to overweight in equities, high yield (HY) credit and investment grade (IG) credits.
- Rotation – we believe that there are more rotation opportunities from market laggards, value and emerging markets.
- Bond yields likely to rise only gradually – overall yields will stay low. The US Federal Reserve (Fed) has anchored low rates more than ever. Our expectations are that the 10-year rate will range between 1% and 1.5%.
- USD outlook seems weak – conversely, Asian currencies look stronger.
- Strong expectations of Asia – we expect stronger performance in Asian equity, fixed income and currencies.
- Income and alternatives – expected to be popular themes this year.
1Forward-looking statements should not be considered as guarantees or predictions of future events and actual results and events may differ
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