PD Wealth Solutions Outlook for 2021
The year 2020 was like no other. For many, COVID-19 brought life almost to a standstill, and in doing so has changed the way people live, work and learn.
"Though challenges remain, we think this global recovery is sustainable, synchronous and supported by policy" says Robert Marsh, Senior Analyst for PD Wealth Solutions.
PD Wealth expects the global economy to grow by around 4% in 2021 as demand continues to recover following the recession in 2020. With policy rates set to remain at or below zero in all major developed economies, equity markets should continue to provide attractive returns. In fixed income, returns on core government bonds will be meagre at best, while credit exposure provides opportunities to enhance returns.
Indeed, PD Wealth's strategists expect 25% to 30% earnings growth across major equities markets and significant declines in corporate leverage - key factors in their call to overweight equities and credit vs. government bonds and cash, along with positioning for U.S. dollar weakness.
It is important to ensure that portfolios have sufficient exposure to real assets. After all, high quality nominal assets promise only very meagre, in most cases negative, real returns since central banks have pushed yields to low levels. With central banks continuing to look for ways to curtail risks, risk aversion and thus equity risk premia still have room to fall, which is likely to add to performance over the medium term. As economies stabilize further after the pandemic- related shock, investors looking to preserve real wealth and meet long-term obligations will be highly incentivized to invest a significant share of portfolios in equities.
2021 could turn out to be the strongest global recovery in a decade if vaccine roll-out plays out as expected, major central banks stay "put" and fiscal stimulus is implemented as planned or even additional fiscal support is on the pipeline. When deflation is now still a key risk to the major economies, PD expects a reflation story in 2021, rather than any hyperinflation worries. This looks like a "Goldilocks"
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Christopher Walsh, Press Officer, PD Wealth Solutions