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Perspectives - Outlook 2021

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Perspectives - Outlook 2021

Is 2021, the year of the phoenix?

After a bumper year for most asset classes, and with hopes rising that the coronavirus will be brought under control, it is time to look closely at where the best upcoming opportunities lie. With this in mind, this special ‘Outlook 2021’ issue of ‘Perspectives’ considers what we believe are the 10 biggest investment themes for the year ahead.

2021 stands to be the ‘year of the phoenix’, with a strong rebound in global GDP and corporate earnings in 2021 linked to the unrolling of vaccines and substantial policy support.

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Who will pay the bill? Or how country selection will be key.

Amid our general optimism about a global recovery, a number of issues call for careful country differentiation: indebtedness and  capac­ity to pay the bills incurred by the pandemic. We will continue to scrutinise the political landscape carefully.

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A wave of green infrastructural investment.

Cyclical, infrastructure-related companies, particularly those that meet environmental criteria, are set to gain extra impetus in 2021 as governments rebuild their econo­mies in the wake of the covid crisis.

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Loser’s revenge. Would the companies worst hit by the crisis make a comeback?

In 2021, we expect the unleashing of pent-up demand will benefit a range of consumer-related and other cyclical sectors that suffered especially hard during the pandemic.

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The resurgence of Mergers and Acquisitions. How hedge funds may benefit.

The extremely low cost of funding and brightening economic outlook are major incentives for M&A. As companies and whole sectors respond to a fast-changing corporate and economic landscape, deal activity could be both offensive and defensive.

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Emerging Markets are back. Equities and bonds primed to succeed.

Emerging markets are set to benefit from a lessening (or at least a stabilisation) of trade tensions, a weakening of the US dollar, a rise in commodity prices and initiatives such as the Regional Comprehensive Economic Partnership in Asia.

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The death of sovereign bonds. Negative returns ahead.

After declining in response to the pan¬demic (and dipping further into neg¬ative territory in the case of German Bunds and other European bonds), sovereign bond yields are set to remain stubbornly low.

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Three convictions in credit. Careful credit selection is of the utmost importance.

With credit spreads moving back down closer to pre-pandemic levels, 2021 should be a year for bond pickers.

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The bond king is dead. Long live the currency king.

With prolonged low (or even negative) yields meaning that government bonds offer portfolios a very thin cushion, it might be worth considering currencies as an alternative ‘shock absorber’ and portfolio diversifier.

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Positive on real assets. Why are they worth looking at.

Real assets such as real estate will continue to play a bigger role in portfolio diversification strategies in 2021.

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Play it again! Some of the previous big themes are still alive.

We believe that sustainable investing and treating volatility as an asset class in its own right remain even more relevant themes than before.

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