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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。

Reiterating-our-bullish-positioning

Perspectives

Reiterating our bullish positioning

Steven Wieting

By Steven Wieting

Chief Investment Strategist and Chief Economist

December 16, 2020Posted InFixed Income, Investment Strategy and Equities

The rallies in most cyclically-sensitive assets have reduced future return opportunities. However, we still see solid absolute and relative performance for our preferred investments over the coming year.  Using rough estimates, only 35% of the dispersion within equity markets driven by the COVID shock and policy response has fully reversed.  Global small cap shares have lagged large cap shares in recent years, and typically outperform in the early stages of economic recoveries. After a strong US outperformance during the last decade, many emerging market assets are priced at deep valuation discounts to US assets. We expect a long-term outperformance in Asia in particular.

We would not expect uninterrupted gains in markets.  The vaccine news has raised expectations. A variety of policy measures to support the world economy through the difficult months ahead are still needed.  Investors are more optimistic in their views of possible US fiscal support, and there is now room for both optimism and potential disappointment.  

The US domestic policy outlook also bears uncertainties ahead of early January elections that will determine US Senate control. The UK and EU have until year end to avoid a “no trade deal” Brexit that could still rile regional markets (please see our latest CIO note).  

Some investor sentiment measures have become relatively stretched after a swift, sharp rise in markets that won’t be easy to sustain.  However, with some exceptions, we see investor positioning as less robust than polls of investor optimism.  The strongest returns of the past year remain in “defensive” investments.   Household and investor balance sheets are flush with cash, while yields are negative in real terms. Central banks have committed to keep inflation adjusted interest rates negative deep into a coming expansion, favoring equities and high yield bonds.

Economic growth prospects should be strong through 2022 at a minimum, with our expectation that the global economy expands nearly 4% in 2021 despite a weak starting point.  We expect global trade and goods production will lead recovery in early 2021, followed by a sharp broadening of activity, when vaccines permit a rebound in social-close services spending. The large number of workers unwilling to participate in labor markets amid COVID risks means the true unemployment rate in the US is close to 10%. This leaves substantial room for above-trend growth for a few years. 

While financial market valuations offer lower future returns now than they did after the crisis a decade ago, the relative value of public and private equity is strong compared to safer fixed income.  The present stage of the recovery cycle and central bank goals to achieve higher inflation in coming years strongly influences our asset allocation.   Away from a somewhat larger near-term COVID impact, a weak policy response, or failure to distribute vaccines effectively, we would expect an enduring new growth cycle.  This suggests greater opportunity to invest on likely market corrections.  As the cycle matures and COVID impact diminishes, we would expect to re-emphasize quality growth and income opportunities rather than “recovery” assets in slow growing industries.

 

For full discussion, please see our Unstoppable Trends in Outlook 2021.  

View our Unstoppable Trends