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EFG’s 2021 Outlook – Predictions and preferences

Investment Insights

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EFG’s 2021 Outlook – Predictions and preferences

After a year of unprecedented change EFG’s Chief Investment Officer, Moz Afzal, and EFG’s macro team present 10 key themes they think are set to influence investment decisions for the year ahead.

Mozamil Afzal
Mozamil Afzal

1. Synchronised global economic recovery

We see synchronised growth across all the major economies for 2021. After the sharp contraction in 2020, an across-the board expansion will take place.

2. Digital consumers

Changing consumer spending patterns will be a big theme in 2021 and beyond. Some will be a continuation of trends set in train by the pandemic. Others will be part of bigger structural changes. Most significant will be the move to online, digital sales channels.

3. Climate change and creative destruction

2021 is a year when we expect the forces of creative destruction to be truly unleashed, especially in the energy and transportation sectors.

4. Inflation stays low

Despite the synchronised recovery and continued high government spending, we expect inflation to remain low. Excess supply will still characterise many global industries. Fears that a surge in monetary growth will lead to higher inflation will prove unfounded.

5. Big government stays big

Governments have necessarily played a big role in the pandemic response and their spending has surged. They may well seek to scale back their spending or increase taxes in 2021. But such measures will be hard to introduce. So government budget deficits look set to remain high for at least several years.

6. Fixed income: attractive opportunities remain

Despite low government bond yields across the main developed markets and tight credit spreads, opportunities in fixed income remain. We see good risk/return profiles for wealthy nations’ debt and convertible bonds.

7. Small is beautiful

In 2020 many of the innovative products and services which came to the forefront had their origins in small companies. We look for small innovative companies to again make a splash in 2021, but exposure needs to be selective.

8. Big tech consolidates

Large US tech companies, which did very well in 2020 – buoyed by remote working, cloud storage, online shopping and so on – will continue to do so in 2021. They will increasingly be seen as regulated monopolies.

9. Healthcare sector

We see good opportunities in the healthcare sector. It is a sector with a variety of different companies, which look able to benefit from the important trends we see in the industry in 2021.

10. Global co-operation reinvented

We see a spirit of greater co-operation returning to global relations. President Biden will clearly have a different style to his predecessor. His approach is almost certainly set to be more consensual, cross-party and multilateral.
 

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