After an unprecedented year, UBS, the world’s leading global wealth manager, expects economic output and corporate earnings to rebound to pre-pandemic levels in 2021.
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, according to the annual Year Ahead outlook published by UBS Global Wealth Management’s Chief Investment Office.
The report’s core recommendations include:
• 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. 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, said: “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, we think the next will be about investing in the disruptors challenging the status quo in other industries.”
Tom Hill, Group Country Head at UBS Jersey, added: “2020 was an unprecedented year and our Year Ahead outlook addresses both the short and long-term impacts that we believe the pandemic will have on the economy. The team at UBS Jersey are looking forward to sharing this information with our clients and continue to provide the guidance and support they expect from us.”