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Language Notification

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

new-year-new-economic-cycle

Perspectives

New year, new economic cycle, new opportunities

David Bailin

By David Bailin

Chief Investment Officer

January 6, 2021Posted InFixed Income, Investment Strategy and Equities

A few months ago, we wrote that the “trifecta” for the beginning of a New Economic Cycle would include a conclusive US election, the arrival of viable vaccines globally and additional fiscal stimulus in the US and abroad.  We also noted that a healthcare solution to COVID had the greatest potential to restore economic activity to its full potential, making further macro stimulus less necessary. All of these events are “in the books”.  As a result, we expect a sharp acceleration in “socially close” services (everything from travel to retail) and a broadening of global economic growth over the course of this year.  This will mark the full start of the New Economic Cycle as we discussed in Outlook 2021.

The global economy will recover more quickly and robustly from the COVID recession than from a more typical, severe downturn. The virus was an exogenous shock whose impacts were spread unevenly. Parts of the global economy were largely spared Covid’s effects and some benefited mightily.  Governments are providing the necessary fuel to support a broad recovery.  In response, global employment and spending will rebound faster than in a “normal” downturn as a result.   As markets have begun to reflect this outlook, investors should be especially mindful of these observations:

  • A period of structurally low interest rates is upon us. When rates are held below normal levels for extended periods of time, the value of cash and many fixed income investments is “repressed.”  In our view, accepting negative real returns in large parts of a portfolio is harmful.  In contrast, the backdrop for equities and real assets is strong.  Wise users of leverage in private equity and real estate will also be beneficiaries of this extended low interest rate environment.

 

  • The legacy of the pandemic will be a reminder of just how much innovation has changed the contours and dynamics of the world economy.  The end of the pandemic will further accelerate Innovation and the adoption of technologies that will generate great value for investors and society over the decades to come.  And all of these are investable possibilities. 

 

  • In the near term, movements in asset prices caused solely by the COVID shock will be reversed rapidly.  The present extent of the mispricing is underappreciated and presents an “alpha creation” opportunity that seldom appears in markets this broadly.  In particular, markets across Europe, Southern Asia and Latin America will be major beneficiaries of a return to trade normalcy after lagging sharply relative to the US and China in 2020.  

 

We would remind readers of our best 2020 observation regarding Covid Cyclicals and Covid Defensives. Covid changed the price of every security on its way in and the price of every security will be similarly altered by Covid’s departure. Though we have seen initial, strong out-performance of the “Leave Your Home” shares, the rebound of these shares relative to the “Stay at Home” basket remains only one-third complete.

Markets anticipate events and so must wise investors.  Yet, the ability of investors to believe in the future scenario we have developed takes time.  At the margin, investors have to see results; millions of people being vaccinated, the reopening of sports stadiums filled with fans and the smiling faces of grandchildren hugging their grand-parents sans masks. But, to profit optimally, investors should act well before the full impact of the trifecta’s impact is experienced.

Read the CIO Strategy Bulletin