The Nuveen Equities Investment Council has called the year ahead for the US real GDP to climb at its fastest pace in 20 years, with US President-elect Joe Biden set to take the nation’s reins.
Bob Doll, senior portfolio manager and chief equity strategist at Nuveen commented the firm has entered the new year with investor optimism running high.
“The reopening of the economy combined with increasing consumer and business confidence should create a positive backdrop for equity markets in 2021, but the key question is how much of this good news has already been priced into the markets,” he said.
Nuveen has also predicted the US dollar will sink to a five-year low, while stocks reach a new high for the 12th consecutive year, but fail to keep pace with strong earnings growth.
Stocks are anticipated to outperform cash, although cash has been to tipped to overtake Treasury bonds for the first time since 2013.
“Stocks should get a boost from an economic recovery combined with continued hyper-accommodative monetary policy, fiscal support for households and businesses and negative real returns on government bonds,” Nuveen stated in its report outlining its predictions for 2021.
The resulting environment is expected to see strong economic and earnings growth over the next year or two.
Value, small and non-US stocks (particularly those in emerging markets) are predicted to outperform growth, big and US stocks. Healthcare and financials are also forecast to outperform energy and utilities.
Success of vaccine tops risks
But as outlined by Esty Dwek, head of global market strategy at Natixis Investment Managers, the roll-out of the COVID vaccines is the primary risk for investors in the year ahead, with it already being slower than hoped.
Hiccups with logistics, availability, population willingness, side effects, mutations, all could lead to a delay in broad inoculations and a possible return to normal conditions already priced in by markets.
The virus could linger for longer than anticipated, freezing global growth, or vaccination could go smoothly, with activity going back to normal sooner than expected and inflation spiking.
US political turmoil also weighs on the year ahead, particularly when considering the nation’s trade tensions with China. Mr Biden is expected to ease relations, but the tensions are expected to linger, with the tech wars not yet over.
