Outlook 2021: Sébastien Galy (Nordea Asset Management)
Outlook 2021: Sébastien Galy (Nordea Asset Management)
By Sébastien Galy, Senior Macro Strategist at Nordea Asset Management
What is the economic outlook for 2021?
Next year we should see a global economy led by China and a moderate recovery in Europe. The US will be an environment supportive for risk, though there are already some pockets of tight pricing in investment grade.
Growth in Europe will likely be defined by its dispersion with economies that have the means and are outperforming in managing the COVID-19 crisis. The US is likely facing a W-shaped recovery. After 20 January, Joe Biden will likely issue a COVID-19-related fiscal package and he will seek to stimulate the economy through infrastructure investments.
What are the biggest opportunities and threats for investors?
We expect European equities to outperform, but with a lower weighting on growth stocks they are likely to underperform US equities. This should be compounded by a stronger rebound in the US while Europe suffers from a mild W-shaped recovery. Value will likely pay more in the US as it tends to be cyclical.
With interest rates so low, we expect technology to continue to outperform, which will come down to stock selection. The likes of Amazon and Google have quasi-monopolies and will likely be under increased regulatory pressure, particularly in Europe. Second tier stocks typical in climate funds are likely to be more attractive.
The environment next year should be broadly supportive for risk, yet there are already signs of excessively tight pricing in investment grade. We expect bouts of volatility and lower growth expectations as a result. We suggest holding flexible solutions that can quickly adapt to new circumstances.