Outlook 2021: Paul O’Connor (Janus Henderson Investors)

29 dec 2020

By Paul O’Connor, Head of Multi-Asset at Janus Henderson Investors

What is the economic outlook for 2021?

While 2021 looks to be a strong year for global growth, the economic reality will probably be less buoyant than this suggests. Many sectors and regions will remain scarred by the pandemic for years to come. Additional fiscal easing could alleviate some of these economic tensions, but major governments seem reluctant to move in this direction, meaning the global recovery is likely to remain uneven and incomplete.

The recovery of the European and US economies will undoubtedly be overshadowed by the continued battle against COVID-19 in the early months of the year. Progress on testing, therapeutics and vaccines should allow these regions to converge on Asia’s and Australasia’s return towards more normal levels of social mobility later in the year.

What are the biggest opportunities and threats for investors?

The prospects of a broad reopening of the global economy in the second half of the year suggests that the asset-class performance tables in 2021 may be a reversal of 2020. The best opportunities are likely to be found in cyclically sensitive assets, such as equities in emerging markets, Europe and Japan.

It will be a great surprise if investor sentiment regarding developments on the COVID-19 virus front does not oscillate significantly in the first half of the year. Market volatility related to these mood swings should present both challenges and opportunities for investors. Meaningful disappointment on the vaccine front, or a discovery that COVID-19 immunity will be temporary, are two potentially troubling tail risk scenarios.