Global wealth manager UBS expects economic output and corporate earnings to rebound to pre-pandemic levels in 2021, according to its latest Year Ahead report, entitled A Year of Renewal.
In a base case scenario, a combination of fiscal stimulus, continued low interest rates, and a vaccine rollout should generate above-average returns for small- and mid-sized companies, select financial and energy stocks, and companies in the industrial and consumer discretionary sectors, it says.
Published by UBS Global Wealth Management’s Chief Investment Office, the report's key recommendations include the following:
• Diversify portfolios for the next leg higher in equities by looking beyond the resilient, large and US-based firms that dominated in 2020. Investors should think global, look for catch-up potential, and seek new long-term winners.
• Diversify out of low-yielding cash and bonds and hunt for yield in emerging market US dollar-denominated sovereign bonds, Asian high-yield bonds, and select crossover bonds that are close to the dividing line between investment-grade and high-yield-rated issuers.
• Position for a weaker US dollar. Investors should diversify across G10 currencies or into select emerging market currencies and gold.
Private market and sustainable investments could be valuable additions to investors’ portfolios, according to the report. Heading into 2021, UBS maintains its preference for sustainable investments for private clients investing globally.
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, commented: “We think 2021 will be the year of renewal. Renewed growth, expansive fiscal and monetary policies, and fresh political leadership mean we should also expect new market leadership in 2021.
"Looking beyond the year ahead, investors should also consider sectors undergoing technological transformation. If the last decade was about investing in technology itself, the next will be about investing in the disruptors challenging the status quo in other industries.”
• The full report is available here