Outlook 2021:
Investment Opportunities for the Coming Year
—and Beyond
With
Michael Hartnett
Chief Investment Strategist,
BofA Global Research
Please see important information at the end of this program. Recorded on 12/01/2020.
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Michael Hartnett
Chief Investment Strategist
BofA Global Research
We think the investment backdrop in 2021 is a very healthy one. You are likely to see strong corporate profit growth. And you are also likely to see low interest rates, at least from a relative historic perspective.
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Strong corporate profits + low interest rates
= positive for financial markets
And that combination of strong profits and low interest rates is always a very positive one so far as financial markets are concerned. So, it would not be a surprise to see in 2021 positive returns from both equities and corporate bond markets.
It's also an outlook that speaks to a broadening of the bull market. And a broadening of the bull market, it's been very narrow to date, very concentrated in growth stocks in the U.S. and tech.
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Broadening the Bull Market in 2021
· Small-cap stocks
· Value stocks
· Cyclical areas
It's likely to broaden next year into areas like small cap, value, cyclicals, areas that haven't really participated much in 2020 in the bull market. We think that's a healthy development.
In addition to that, there are secular themes to those cyclical themes, secular themes that have been brewing for some time, but we expect to accelerate going forward:
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Longer-term Investment Themes
· Bigger government
· Deglobalization / reshoring of businesses
· Lower U.S dollar
Bigger government, a smaller world, which means less globalization or reshoring businesses to their domestic economies, and potentially debasement of the U.S. dollar.
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Demographic themes
There are also demographic themes to do with the shift from the boomers to the Millennials in terms of electoral and spending power.
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Sustainability & climate change
And of course, there is ESG and the shift towards a more climate sort of friendly backdrop so far as business is concerned.
The less healthy development may well be that you end up with less support from interest rates. You are likely next year to see interest rates move up. And that's something that for bond investors needs to be kept in mind in terms of your bond allocations.
IMPORTANT INFORMATION
All data as of 12/01/2020 and forecasts are subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
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Value stocks are securities of companies that may have experienced adverse business or industry developments or may be subject to special risks that have caused the stocks to be out of favor. If the manager’s assessment of a company’s prospects is wrong, the price of its stock may not approach the value the manager has placed on it.
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