2021 Outlook: Forging a path forward
Almost always, economic recoveries have arisen from dark points in our history. And investors know well that some of the best investment opportunities often present themselves from non-consensus ideas. These patterns are developing again, Darrell L. Cronk President, Wells Fargo Investment Institute said.
Selected year-end 2021 forecasts
End-November 2020 values and predicted values for 2021
ECONOMY: A bumpy transition year in 2021
*We expect the pandemic’s lingering fallout to sustain uneven global economic growth, accompanied by firmer, but sub-2% inflation for most of 2021.
*We expect aggressive Federal Reserve stimulus to fuel dollar depreciation, mostly against the euro. However, the global growth recovery and less pressure on global trade also should stabilize emerging market currency exchange values.
What it may mean for investors:
*We believe ongoing recovery from the upheaval of the past year should provide a supportive backdrop for asset markets in 2021.
*Moderate economic growth and subdued inflation are consistent with adequate earnings growth and historically low interest rates, favoring gains in stocks and limiting the threat to bonds.
*In our opinion, dollar weakness against the euro should help ease global deflationary pressures while boosting dollar-denominated returns on European investments.
Risks:
*We believe the most visible risks to our 2021 growth outlook are pandemic-containment efforts that are stringent enough to reverse the recovery, leading to a double-dip recession. Other growth hurdles could come from an end to rental forbearance and other credit-quality issues at the same time that government spending pulls back.
*Europe’s worsening economic slowdown, increased monetary stimulus by the European Central Bank, and “flight-to-quality” support for the dollar in more turbulent market conditions could upend forecasts of dollar weakness relative to the euro, in our opinion.
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