markets & economy  |  december 14, 2020

2021 Global Market Outlook: Managing to the Other Side

New vaccines could accelerate recovery, boost cyclical sectors.


Key Insights

  • New coronavirus vaccines offer a potential lift for economies in 2021. However, a spike in COVID-19 cases could slow recovery in the first quarter.

  • Economic improvement could shift spending from firms that gained during the pandemic to cyclical names damaged by it, potentially favoring value over growth.

  • Fixed income investors will need to be creative in 2021, as low yields and tighter credit spreads could make attractive returns harder to find.

  • Social and economic upheaval caused by the pandemic could worsen political divisions. Tensions between the U.S. and China are another potential flashpoint.

David Giroux

Chief Investment Officer, Equity and Multi-Asset

Mark Vaselkiv

Chief Investment Officer, Fixed Income

Justin Thomson

Chief Investment Officer, International Equity

The 2020 global pandemic tested the ability of companies and investors to manage their way through an unforeseen and dangerous period. However, T. Rowe Price investment leaders believe the other side of that journey could come into view in 2021 if new vaccines and continued fiscal and monetary stimulus add momentum to the economic recovery.

Rapid progress with a first wave of new vaccines based on messenger RNA (mRNA) technology clearly is the most hopeful sign, says David Giroux, chief investment officer (CIO), Equity and Multi-Asset.

“The vaccines are an unmitigated positive, and I believe the next wave of them will be as efficacious or more efficacious than the mRNA vaccines,” Giroux says. “This could allow us to get back to normal at a faster rate.”

A broader economic recovery is likely to benefit many of the sectors that were most damaged by the virus, such as travel, leisure, energy, and financials, notes Justin Thomson, CIO, International Equity. However, technology, e-commerce, and home delivery firms that saw sales surge during the pandemic could face tough earnings comparisons.

A stronger recovery in 2021 would carry risks for bond investors, warns Mark Vaselkiv, CIO, Fixed Income. He says investors will need to be creative in seeking out fixed income sectors—such as floating rate bank loans and emerging market corporates—that potentially can do well in a rising interest rate environment.

Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of December 2020 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. Actual future outcomes may differ materially from any estimates and forward-looking statements made.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. These risks are generally greater for investments in emerging markets. Fixed-income securities are subject to credit risk, liquidity risk, call risk, and interest-rate risk. As interest rates rise, bond prices generally fall. Investments in high-yield bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Investments in bank loans (floating rate loans), may at times become difficult to value and highly illiquid; they are subject to credit risk such as nonpayment of principal or interest, and risks of bankruptcy and insolvency. The value approach to investing carries the risk that the market will not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. Growth stocks are subject to the volatility inherent in common stock investing, and their share price may fluctuate more than that of a income-oriented stocks. All charts and tables are shown for illustrative purposes only.



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