Finance: what to expect in 2021
As I did concerning the real estate sector, I thought it would be useful to carry out the same subject on the world of finance, although finance and real estate are so complementary and common worlds.
Have an amazing reading,
Flavien Darius Pommier
Financial markets have logically experienced a complicated, contrasting, and unreal 2020 year. Many players are waiting for one thing: for relative normality to re-establish itself in 2021 and for the fundamentals of global finance to stabilize again. In short, they are looking for certainties. Here are a few lines of my thought…
Before anticipating my strategy, it is essential to “smell” the market. First observation, the end of 2020 will have seen a strong recovery momentum in the fourth quarter in the U.S., which creates a risk of slowing growth in the first quarter of 2021. The context is more uncertain in Europe, due to restrictions at the end of 2020 and the blocking of the European Union’s recovery plan.
With the onset of the coronavirus crisis, many predicted a rapid economic recovery in the second half of the year, often described as a V-recovery. Reality is turning out a bit bleaker, according to the consensus. It remains to find, in this case, a reasonable path and an effective tactic for investments.
Considering the violent and sudden economic impacts of Covid-19, investors must, in the short term, review their strategies, which considers that things can and will normalize. Investors need to be prepared for this, so it doesn’t make sense to shed strong assets before this normalization. However, it may be necessary to add short-term investments, focused on so-called “covid-safe” assets, such as cloud technologies or healthcare products. While adapting and turning around is important, straying too far from established market standards would be a mistake in the long run, notes the financial institute.
Regarding China, other avenues discussed, real estate, manufacturing and trade will outperform sectors such as services, finance and energy. Geographically, China is highlighted by Lombard Odier. China’s economic recovery and its economy more focused on the domestic market mean that the country’s equity markets are increasingly decorrelated from the stock indexes of the rest of the world. The country will also be one of the first beneficiaries of the thaw in trade relations with the United States under the Biden administration. In other emerging economies, the outlook is expected to improve with the recovery in world trade after two years of contraction.
Regarding gold, short-term uncertainties should keep the price of gold in the range of $ 1,850 to $ 2,000 an ounce, which provides relatively effective protection against stock market volatility. Later in 2021, when the recovery takes hold, the gold price could then move closer to $ 1,600.
Also, the health sector seems to be unanimous. I also consider that innovative advances and sustainable cost reductions remain key performance factors in the healthcare sector. For its analysts, the defensive nature of the industry has paid off during this tumultuous and difficult year of investing. Some industry indices far outperformed the market, especially in April and May. Yet health indices are still trading at historically low valuations.
Regarding the U.S. and the Dollar, the aficionados of the turpitudes of the greenback are not forgotten by our forecasters. Despite a 12% drop since March 2020, the US dollar remains overvalued and still carries some risk linked to US electoral chaos. Major G10 currencies, such as the euro, pound sterling and yen, should hold up well. However, foreign exchange markets will selectively turn to emerging currencies.
To sum up, a return to growth and a less uncertain environment should in particular favor risky assets for 2021…
Thank you for reading,
Flavien Darius Pommier
