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Craig Burelle

Senior Macro Strategies Analyst
Loomis Sayles
With the recovery phase of the cycle now unfolding, we anticipate corrections along the way - but overall we expect risk-on days to outnumber risk-off days in the quarters ahead.
In December 2020, we asked our experts for their predictions on the five key questions the global economy faces as we enter the second year of the pandemic.

Here Craig Burelle offers his thoughts on the key factors driving the investment environment in 2021.
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Growth: The Global Economic Recovery Will Continue
Supportive policy and widespread distribution of effective vaccines will propel the global economic recovery in 2021. Activity in China is likely to reach pre-pandemic levels first, with the US to follow in late 2021 and Europe in early 2022. The powerful combination of monetary and fiscal stimulus measures will help restore economic growth while vaccines are prepared for distribution during the first quarter.

We expect accommodative monetary policies to remain in place for a number of years after vaccines are widely administered to the population. As economic activity begins to normalise, we believe low interest rates will provide the additional thrust needed to push growth above pre-pandemic levels.
Pent-up demand should boost consumer spending throughout the second half of 2021 as populations reach the beginning of the end of social distancing.

Risk-On / Risk-Off
Media headlines can drive risk sentiment for short periods, making it tempting to prepare for a correction - especially when assets are carrying strong gains.
However, we believe the best strategy is to focus on the long-term macroeconomic backdrop as it relates to the global credit cycle. The best time to invest in risk assets is often right before an economy exits the downturn phase of the credit cycle.

That dynamic held true during the Covid-19 downturn in 2020. With the recovery phase of the cycle now unfolding, we anticipate corrections along the way, but expect risk-on days to outnumber risk-off days in the quarters ahead.

Portfolio Rotation
As the likelihood of an effective vaccine grew, the global equity market rally broadened across all sectors including cyclically-tied energy and financials.
2021 will likely be marked by solid performances across sectors and international markets as the credit cycle progresses into the recovery phase. The global uptick in cyclical activity should boost sectors, of the market more leveraged to the economic recovery, while defensives like staples and utilities may lag.

The outperformance of growth versus value should be less pronounced in 2021. Global markets have the opportunity to perform in line with the US as positive performance broadens to sectors besides information technology. Sector performances during the first half of 2021 will most likely rhyme with what we saw in the fourth quarter of 2020.


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  • August 31, 2021