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Investment strategy
January 6, 2021
3 mins

New year, new economic cycle, new opportunities

January 6, 2021
3 mins
David Bailin
Steven Wieting
Business people waiting in airport departure lounge

With vaccine distribution ramping up, we expect a sharp acceleration in socially close services and broadening global economic growth during 2021. Investors should position portfolios accordingly.

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. 


See our insights and the issues that matter for your wealth. 

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See our insights and the issues that matter for your wealth. 

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