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LOOKING AHEAD

Global capital markets will continue to respond favorably to policy stimulus, even as pandemic-related restrictions constrain economies. A successful vaccine rollout, along with continued monetary and fiscal stimulus, suggests improving earnings and a more rapid global recovery. In this cyclical environment, we maintain a preference for risk assets, including cyclicals, small cap, and real assets.

  • U.S. economy to lead global growth, expanding 6% (up from 4.8%) in 2021 with GDP reaching new high in 2Q 2021. 
  • By year-end, U.S. EPS will exceed the 2019 peak by 8%. EMs to also show positive EPS growth from 2019, while Europe just falls short.
  • Massive stimulus from developed-market central banks continues. Although, stimulus will come at a slower pace, it will provide support for risk assets through 2021. 
  • Risk appetites will be less sensitive to virus activity and more sensitive to inflation fears.
  • Even as they face inflation, central banks will keep rate rises on hold for the foreseeable future. U.S. PCE inflation will end 2021 between 2.25 - 2.50%
     


At this stage, there are three key risks that could disrupt this base case:

  • A growth scare, triggered by virus activity and worsened by virus variants or vaccine missteps, leads to bankruptcies and job losses.
  • Inflationary pressures build up quicker than expected, raising questions around the Fed’s dovish resolve.
  • The U.S. Congress accelerates sweeping regulatory, competition, and taxation reforms of the tech sector. 

 

 

As of 31th March 2021. These are the current views and opinions of Principal Global Asset Allocation and is not intended to be, nor should it be relied upon in any way as a forecast or guarantee of future events regarding particular investments or the markets in general

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This document has been prepared by Principal Global Investors for informational purposes only. The contents of the document should not be construed as an advice on legal, financial or regulatory issues. No person should rely on the contents of this document without first obtaining independent advice from qualified professionals. The National Bank of Ras Al Khaimah (P.S.C), its employees and consultants expressly disclaim all liability and responsibility to any person who reads this document in respect of anything done or omitted to be done by such person in reliance, whether wholly or partially, upon the contents of this document and shall not be responsible for the results of any actions taken on the basis of information provided in this document or for any error in or omission in this document.