What is the Global Investment Outlook 2021? | Elite Connect Investment

Market Review 2020

• In the financial markets, we have seen a remarkable recovery in equity markets since March. Besides that, the US dollar (DXY Index) has weakened since May 2020.
• With steepening yield curves and relatively contained credit spreads, the global economy has shown signs of recovery.  
• A resurgence of Covid-19 cases has led to new national lockdowns in Europe recently. 
• Major news networks have projected Joe Biden's victory in the 2020 election.

What is the global investment outlook for 2021?

US election

• The US is likely to have a divided government with the White House, and Congress split between parties.
• Higher taxes and higher minimum wage policies are very unlikely, even with a Biden win. 
• The upcoming presidential term is likely to focus on rebuilding the economy. Infrastructure investment is expected to be one of the focuses.
•  If Trump follows through on his announcement to advance his case to the Supreme Court, we may be looking at weeks or even months of uncertainty.
• Under a contested election scenario without a resolution before 14 December 2020, the US equity markets could drop by more than 10% while the volatility could increase. On top of that, the flight-to-safety flow could lead to higher US treasuries and gold prices. 
• However, the likelihood is remote for the recounts and legal challenges to overturn Biden’s win.

COVID-19

• Stanford Medicine News Center’s website reported Microsoft co-founder Bill Gates and Stanford Medical School dean Lloyd Minor spoke on 21 October 2020. 

“In this pandemic, even though the death rate is way lower than it might have been, the economic devastation has been much greater. It will easily get to $10 [trillion] or perhaps even $15 trillion overall over the next two years before we really get completely back to normal,” Bill Gates said.

Foreign affairs

If Biden becomes the US president, the likely scenario is as follows: 

• a renewed commitment to US leadership in addressing global challenges such that China cannot capture and contort the global governance system
• more consultation with the US allies and partners to forge a consistent and coherent China strategy; and
• a recalibration of the U.S.-China relationship that could include re-establishing the bilateral dialogue and exploring areas of common purpose to avoid the ties spiraling into a cold war,
• Since climate change will be a big part of Biden’s administration, it could be an area to collaborate with China. 
• U.S.-China rivalry is likely to stay structurally elevated across technology, trade, and investment due to bipartisan support for a more competitive China stance.

Stimulative measures

• The potential of partisan disputes over the US fiscal policies dim the prospects for a fiscal stimulus package above USD 5 trillion over the upcoming presidential term. The forecast for the four-year spending is USD 1.5 - 2.5 trillion. It suggests a slower economic recovery for the US.
• The key central banks globally are likely to maintain easing bias for their monetary policies with extremely low interest rates. 
• The yields for the safest assets, such as US government bonds, are expected to remain very low. 

Global Economic Outlook

• Downside risks for global GDP growth remain in a time of uncertainty. 

Investment strategies

In a world of uncertainty, asset allocation should be resilient enough to effectively navigate both risks and opportunities. In this case, portfolios that can weather various future scenarios are required. We like the following strategies:

• stay nimble
• prefer asset classes in liquid markets

- cap the exposure to the asset classes that have long lock-up periods or are illiquid

- increase allocation to relatively liquid asset classes

• asset classes to underweight

- long-only equities, preferences for technology, healthcare

- long-only bonds

• Asset classes to overweight

- hedge fund

- precious metals such as gold

-insurance-linked securities, e.g., life settlements

• farmland

Conclusion

As always, investment manager selection remains the key to achieving your objectives for wealth creation.

For inquiries, contact me now.  

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Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Please consult with a qualified financial advisor before making any investment decisions.