Enormous monetary interventions around the world should lead investors to increased short-term risk-on risk-off approaches. This should in turn fuel extreme market moves, alternating with very quiet periods
Here Nicolas Just offers his thoughts on the key factors driving the investment environment in 2021.
Covid-19: The World Will Return to ‘Normal’
Covid-19 should again be the central element impacting financial markets as there are still major uncertainties regarding the various vaccines: their efficacy, their distribution strategies, and the degree to which global populations will accept them. As a result, the pandemic’s impact on economic growth might be more negative in 2021 than currently anticipated.
Risk-On / Risk-Off
In 2021, we should see more of the same phenomenon that has defined the last five to seven years on the financial markets.
The enormous monetary interventions around the world should lead to an increased short-term risk-on risk-off approach by investors. This in turn should continue to fuel short-term extreme market moves alternating with very quiet periods. As a consequence, we are likely to see short-term and extreme peaks in volatility followed by quick falls.
Company fundamentals today matter far less than financial flows and public health and monetary policies. Investors no longer have robust valuation levels that could be used as references, accelerating market moves from one extreme to another.