New Delhi; India, Indonesia and the Philippines have struggled to balance virus containment with the need for economic growth.
The J.P. Morgan Outlook for 2021 said: “We think a full recovery in these economies ultimately depends on a globally available vaccine.”
It noted that Europe has fallen marginally behind as a resurgence in new cases has slowed the recovery’s momentum from its previously robust pace. Recent weeks have brought a more rapid escalation of new infections than authorities were expecting. Some countries (including Germany, France and the UK) have responded with fresh lockdown measures.
The J.P. Morgan report noted: “Yes, equity valuations are high, but we believe high valuations are deserved. They may even be the new normal as long as global central banks stay accommodative and long-term interest rates remain near secular lows.”
“We think both are good bets over the medium term. We believe stocks are likely to generally outperform fixed income and cash in 2021. On the currency front, the dollar will likely weaken modestly as the global recovery proceeds,” it said.
Investors should keep an eye on currency exposures and consider beneficiaries of a weakening dollar, such as emerging markets. In sum, amid a healing global economy, markets offer a wide range of opportunities to uncover, and risks to manage, it added.
“We also think investors should focus on assets that do well during periods of modestly rising inflation, such as equities, real estate, infrastructure and commodities,” the report said.
“Finally, we are starting to see the light at the end of the tunnel. Welcome news on Covid-19 vaccines arrived near the end of a difficult and volatile 2020,” the report said.
“Trial results of several vaccine candidates suggest greater than 90 per cent effectiveness, promising an eventual end to a global pandemic that has disrupted the lives of so many of us. In response, broad equity markets are close to all-time highs, and the stocks of companies in industries most impacted by virus restrictions have been rallying in anticipation of the benefits that a return to normal will bring,” it added.
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