Due in part to its role as a safe haven amid the global pandemic, U.S. market outperformance was magnified in 2020, further extending relative U.S. valuations versus the rest of the world. However, 2021 looks more promising for markets outside the U.S. as the coronavirus pandemic and other headwinds begin to fade amid accelerating global growth.

While the precise timing of vaccine distribution is still uncertain and many hurdles remain in the fight against COVID-19, we expect a much healthier economic environment by the end of 2021. Not only can we expect many of 2020's shuttered businesses to reopen, but we are also likely to see two important growth catalysts arising from pent-up demand and renewed fiscal stimulus. 

After four decades of trending lower, U.S. short-term rates reached their presumptive bottom of 0% following the onset of the coronavirus pandemic in March 2020. The Federal Reserve responded by dropping the federal funds rate to the 0%-0.25% range and shifted its policy framework to reach maximum employment before raising rates, signaling no rate hikes through 2023. Since short-term Treasury yields historically have tracked the federal funds rate, we see short-term rates staying anchored in 2021.