ECONOMIC AND MARKET OVERVIEW
Global
In the past year, the global economy had its worst recession in living memory while global financial markets recorded strong returns in many cases outperforming their long term average.
Visio Capital reports that this dislocation between economic growth and financial market performance can be attributed to policymakers, mainly in developed markets, implementing extremely accommodative monetary and fiscal policies This is being done in an attempt to (at least partially) protect businesses and consumers from the effects of the synchronized global lockdown caused by the spread of Covid 19 A clear illustration of this dislocation can be found in equity markets where extreme valuations can be attributed to very low (if not negative) real interest rates
In addition to this apparent anomaly between the real economy and investment markets there are several other factors that investors need to take note of The effective distribution of Covid 19 vaccines throughout the world will be key to a more stable outlook, but it’s not the only element that will influence investor sentiment in 2021 According to a recent report from Franklin Templeton, the election of Joe Biden as United States president seems to have calmed financial markets to some extent The outlook for fiscal stimulus is still unclear though, and any near term support agreed by the US Congress is likely to be smaller in scope than desired by the Democrats
Aside from the delivery of emergency economic support, the incoming US administration also has a mandate to change the current approach in many policy areas, including international relations, infrastructure, taxation and climate change Now that the Democrats effectively control the US Senate it’s more likely that they will implement their full wish list.
