Executive Summary:

As we look ahead to 2021, we see a continuation of many of the themes that drove the markets in 2020, but with different implications:

  • The pace of vaccine rollout suggests economic recovery may be deferred until 2H 2021.
  • We expect continued stimulus, which should support markets and boost liquidity.
  • Relatively low yields will keep fixed income unattractive.
  • The unclear ramifications for a post-Brexit European / UK economy increases market risk in the region.
  • As the pandemic comes under control, we expect a renewed focus on relations with China, particularly concerning trade.

We are increasing our overall tactical equity allocation slightly. Widespread vaccine distribution combined with market liquidity could lead to market expansion later in 2021. In fixed income, we are making slight adjustments to our tactical allocations, reflecting a lack of positive catalysts given low interest rates, along with potential market risks in Europe and the UK.  We are maintaining our tactical allocation to alternatives in 1Q21 given our view that liquid markets will likely be volatile over the short term.

Download Quarterly Market Update and Outlook.