House View January 2021Published on 14 Jan 2021
2021 Investment Outlook: Darkest Before the Dawn
2020 was a defining and historic year, characterised by an unprecedented global health crisis and peacetime policy response.
At the time of writing – in early January 2021 – the pandemic continues to wreak havoc across the world. In the UK, a new virus mutation is driving a sharp acceleration in infections. This variant, and another more infectious mutation in South Africa, has already spread to other regions. Many developed countries are again in national lockdown, subjecting millions of people to tough restrictions on their daily life.
We emphasised early on the pitfalls of market timing in a crisis. As a result, most of our multi-asset portfolios ended the year with competitive positive returns.
The contrast between the current economic freeze and future optimism suggests it is darkest before the dawn. There is a realistic prospect of the pandemic improving over the coming months as the vaccination roll-out accelerates and winter turns to spring in the Northern Hemisphere.
Against the backdrop of a meaningful moderation in the pandemic and reduced geopolitical risks, we identify three key drivers for markets and our investment strategy in 2021, outlined below.
2020 reminded us all how unpredictable the future can be. There are multiple risks that we can identify and evaluate investment strategy against. In particular, the potential for the pandemic to persist for longer than expected despite vaccines and other treatments and also how quickly the global economy can rebound should unemployment benefits be rolled back too soon.
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