A combination of vaccine roll-out, pent up consumer demand, fiscal stimulus and accommodative monetary policy set the stage for a sharp global economic recovery in 2021. Improved global growth will drive corporate earnings significantly higher, which should support equity markets.
The challenge for equity markets are the rising long term interest rates which are already causing some periodic angst, particularly in the long-duration tech sector. Inflation should pick up this year, but not dramatically, and Central banks will continue to try and support the recovery with ongoing QE and zero cash rates. On balance, equities should be higher by year end, but we predict we are entering a more volatile phase for markets.
In this week’s Asset Allocation we examine:
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David is one of Australia’s leading investment strategists.