- Despite continued Covid-19 challenges, a slower-than-expected vaccine rollout, and US political tensions related to the Georgia Senate runoff races and contentiousness around the November US presidential election result, markets continued to grind higher. Several key equity markets closed out the year having reached all-time highs.
- The inauguration of Democratic President Joe Biden and a newly established Democratic majority in the Senate will likely have near-term policy implications relevant to markets. It increases the likelihood of additional federal Covid-19 fiscal aid and corporate tax increases. Infighting among both political parties, the razor-thin nature of the Democratic majority, and the state of the ongoing economic recovery are likely to moderate policy considerations in the near term.
- Gradual economic improvement is expected to continue in the near term, with convergences related to Covid-19 “winners” and “losers” expected as well. Opportunities in cyclical companies (including transportation companies) should continue to emerge as yields continue to drift marginally higher. US small-caps may also benefit from an improving economic outlook amid the continued vaccine rollout.
- Looking further into 2021, we are expecting more normalization around ten-year Treasury yields – modestly higher from where we are today. However, we do not expect inflation to return. Meanwhile, monetary policy accommodations remain a key ingredient to our optimistic economic outlook. Any move by the US Federal Reserve to taper or slow its asset purchases could create some volatility.
This material is provided for informational purposes only and should not be construed as investment advice.
The views and opinions expressed are as of January 2021 and may change based on market and other conditions. Unless otherwise noted, the opinions of the speakers provided are not necessarily those of Natixis Investment Managers or any of its affiliates.
There can be no assurance that developments will transpire as forecasted. Actual results may vary.
Performance data discussed represents past performance and is no guarantee of, and not necessarily indicative of, future results.
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