Happy New Year! I’ve yet to have anyone use this phrase without some sort of additional “disclaimer” about declaring it can’t be any worse than 2020, a wish for better times ahead, or relief that 2020 is finally over. These all seem very appropriate on so many levels, although the returns achieved by most markets are one exception. After the historic selloff related to COVID-19, it seems that we have emerged from one of the most extreme yet short-lived corrections on record. Those investors that were able to stay focused on their longer-term goals and avoid much of the panic-driven liquidations were once again rewarded.
I always spend time in early January reading through the projections and predictions that all of the investment firms compile about the coming year. Although we have some definite headwinds as we move into the new year: high unemployment, increased government debt, potential policy changes, continued civil unrest, the persistence of COVID-19 … and many more, there are still many fundamental reasons to stay invested and to even expect continued positive returns in many sectors and asset classes of various markets. Extremely low interest rates, increased money supply thanks to the fed, technology-driven productivity, strong corporate profits, and continued government stimulus are all very strong market drivers. The link here is an “Outlook” from Blackrock. As the largest investment manager in the world, I thought this would be a good place to start. They also present themes that are common with many of the other firms and analysts that I look to for input on positioning portfolios. A link to their more extensive report is on the first page of this executive summary.
Below are the 2021 themes highlighted by Blackrock:
1) Favoring equities for potential growth in a continued low rate environment. Expecting continued poor interest rates from fixed income securities.
2) Emerging Markets are positioned favorably in international markets providing growth potential over Europe and Japan.
3) Socially Responsible/Sustainable assets, those that use the additional evaluation criteria in the areas of the Environment, Social issues, and Governance (ESG) are poised to grab greater share of investment dollars.
You might find it surprising that Socially Responsible/Sustainable investing made the list. Blackrock’s reason for “favoring” SRI seems to be purely based on the potential for strong returns. This confirms what we have been presenting for years now – one can invest according to their values and potentially achieve higher returns as well. As Blackrock states: “In the long run, we prefer sustainable assets amid growing investor attention to sustainability-related issues.”
If you would like to discuss this more, please contact me.