Markets in 2021: what the experts think
● Nice November It’s been a difficult year for anyone keeping the “majority of their money” in UK shares, said Jeff Prestridge in The Mail on Sunday. The FTSE 100 and the FTSE AllShare indices are both down, by around 16% and 15% respectively. Yet “despite the calamitous impact of the pandemic on the economy” – and the ongoing risk of a disorderly Brexit – “there seems to be a little blue sky on the horizon”. Traders certainly think so, said Tom Howard and James Dean in The Times. “November was the best month for the FTSE 100 in more than 30 years” – the index gained 12.4%.
● More of the same?
Elsewhere in the world, records have been smashed, noted Elliot Smith on CNBC. The pan-European Stoxx 600 index “clocked up its best-ever month” and the MSCI World Index only narrowly missed out. The rally has been “fuelled by coronavirus vaccine progress on multiple fronts and continuing unprecedented support from central banks” – two factors that bullish traders reckon will continue into the new year. Investors are getting more adventurous, said Tom Stevenson of Fidelity in The Daily Telegraph – we are already seeing an “asset allocation shift” into new territories. One driver is that emerging markets (EMs) “look cheap”; another is likely “easing trade tensions” under a Biden US presidency. And, in Asia, there’s also the benefit of being “first out of the pandemic”.
● Emerging evidence
“As Wall Street sets out its big ideas for 2021, EM is top of the list,” said Jonathan Wheatley in the FT. Indeed, Renaissance Capital, an emerging and frontier market specialist often wary of making bullish calls, has advised investors to “buy anything and everything in the sector”. Analysts at Goldman Sachs reckon there is particular “snapback potential” in Mexico, which should “benefit from a strengthening US economy”, and Brazil, which could be “lifted by rising commodity prices” as the global economy recovers. Renaissance’s Charles Robertson – who suggests buying a “basket of African foreign currency bonds” – argues that “fundamental to the EM investment case” is a weaker US dollar. Some analysts expect the greenback to fall by as much as 20% next year. If that is the case, it would “provide a huge underpinning for emerging market assets”.