Forecasts Quarter 3 2021

Chief Economist
Portfolio Manager

Global Economic Outlook

  • We raised our 2021 global growth forecast to 5.9%. As vaccinations drive reopening and normalization of economic activity outside the US, the US growth advantage gets eroded; the rest of the world likely becomes the dominant growth driver in 2022.
  • Globally, we are past the moment of peak policy accommodation. Momentum is shifting in favor of removing accommodation; gradual as that process will be, it represents a key source of potential risk and volatility.

Emerging Markets Outlook

  • While the EM recovery lags the DM recovery in the immediate aftermath of the COVID crisis and EM central banks have already started raising rates, that growth gap should narrow drastically in the latter part of 2021 and in 2022.

  • The reality of booming global manufacturing activity benefits emerging markets given their roles as manufacturing hubs and/or commodity producers, helping offset the impact of a slow vaccination pace on domestic activity.

Global Capital Markets Outlook

  • A more durable episode of consumer price inflation is not a foregone conclusion, but the risks are prevalent enough to tilt towards asset classes that can help protect against a loss of purchasing power over both short and intermediate horizons.
  • In the near term, we find some intriguing, and counterintuitive, relationships across fixed income assets during periods when inflation is increasing.