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Economic and Market Outlook for 2021
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2021 Outlook
We’re expecting a benign cyclical recovery from a low base of economic activity in 2020. Whilst there are risks that relate to the rollout of the vaccine which underpin this economic theme, it is the most likely outcome at the moment.
Based on this theme, we see the continuation of growth assets outperforming defensive assets as cash rates stay low, governments continue to have aggressive bond purchasing programs (QE) and TINA (equities as the last man standing, There Is No Alternative). Those economies with the greatest operating leverage will benefit the most. Exporters such as Japan, Emerging Markets and Australia should outperform.
Based on a benign cyclical recovery which assumes interest rates do not rise, we remain overweight credit but have taken some profits in the sector having benefitted from tightening spreads. We have offset some of the risk of this overweight position with a continued preference towards higher credit rating (A and above) but would consider moving lower in grade to capture higher yields. Spreads are expected to contract further over the short to medium term.
The risk to this theme is twofold:
- The vaccine rollout program fails. This is a multi-dimensional problem based on the speed, safety and possible side effects based on rushing vaccines to market in a quarter of the time usually considered the safe period for deployment.
- The cyclical recovery is stronger than expected and interest rates do shift upwards, re-rating growth assets which are currently priced on extremely high valuations, using zero interest rates.
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What We Do
Evergreen Consultants is an independent investment consulting business, working with financial advisory firms to provide a range of bespoke investment solutions designed to deliver flexibility, efficiency and an enhanced client experience.
We provide traditional end to end investment consulting services: fund and security selection, asset allocation, portfolio construction, investment committee participation and management and reporting and analytics services. We can offer these services to build solutions on a variety of platforms, including managed accounts.
Our clients include small institutions and high quality independent financial advisers.
The 2021 Economic and Market Update has been prepared by Evergreen Fund Managers Pty Ltd, trading as Evergreen Consultants, AFSL 486 275, ABN 75 602 703 202 and contains general advice only. It is intended for Advisers use only and is not to be distributed to retail clients without the consent of Evergreen Consultants. Information contained within this update has been prepared as general advice only as it does not take into account any person’s investment objectives, financial situation or particular needs. The update is not intended to represent or be a substitute for specific financial, taxation or investment advice and should not be relied upon as such. All assumptions and examples are based on current laws (as at January 2021) and the continuance of these laws and Evergreen Consultants interpretation of them. Evergreen Consultants does not undertake to notify its recipients of changes in the law or its interpretation. All examples are for illustration purposes only and may not apply to your circumstances.