Outlook 2021 – Q1

The year that has just ended has been a difficult one for investors in all respects. Looking back on what we wrote just a year ago, there was no sign of the looming health disaster, its economic impact and the volatility generated by the COVID-19 epidemic. Of course, we had envisaged a continuation of the downward trend in global growth, but the risks were relatively balanced. With one exception: uncertainty over the outcome of the US presidential election. In this context, 2020 should have been a year of growth, certainly weak, but positive. It ended up quite differently.

Now that we have moved into 2021, we will first deal with the impact of the crisis with regard to the main economic regions. We will then describe the scenario we anticipate, as well as the evolution of secular trends and risks. All this, followed by an update on the major asset classes.

The COVID-19 outbreak is a very low probability, but high impact, event. However, and on numerous points, the anticipated consequences of the health crisis it caused were not those expected. At the micro- and macro-economic levels as well as from a market or policy point of view, a number of forecasts have been shown to be incorrect. Many of us indeed anticipated a much more violent and general economic impact. For sure, some sectors suffered greatly and the impact on employment was significant, but it was much lower than expected, quantitatively, in terms of growth. For example, the leisure and hospitality sector – one of the hardest hit industries – accounts for 10-13% of employment in developed countries, but accounts for only 4% of economic output.

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