The COVID-19 challenge severely tested global markets in 2020. Aided by unprecedented monetary and fiscal stimulus, markets responded with surprising resiliency. As we move into 2021, however, we expect markets will face another major test.
As the Pandemic Surges, Global Economies Will Be Tested Anew
The resilience of global markets will be retested in 2021. We expect the United States and China to outperform in the year ahead.
Central Bank Action Will Support Investment Grade Credit
Proactive central bank efforts will continue to be a substantial factor in 2021, translating to a favorable outlook for investment grade credit. Local-currency EM debt will also present a compelling opportunity; China warrants particular attention.
Growth and Quality Assets Are Most Likely to Deliver on Earnings
We favor equities compared with other asset classes – but earnings must come through. We believe growth and quality assets, which tend to be concentrated in the United States and in China, are most likely to deliver on earnings in the coming year.
As investment challenges grow more complex, State Street’s Global Market Outlook was created to alert investors to portfolio risks and opportunities in the coming year, based on the research of our investment teams. Research on near-term and longer-term market issues is at the heart of who we are as investors. It drives the kinds of outcome-oriented portfolios we create for clients, drawing on the full range of our indexed and active solutions, as well as our asset allocation expertise.
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Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Investing in high yield fixed income securities, otherwise known as “junk bonds”, is considered speculative and involves greater risk of loss of principal and interest than investing in investment grade fixed income securities. These lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.
There are risks associated with investing in Real Assets and the Real Assets sector, including real estate, precious metals and natural resources. Investments can be significantly affected by events relating to these industries.
Investing in foreign domiciled securities may involve risk of capital loss from unfavourable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.
Investing involves risk including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
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