Monthly Investment Outlook - December 2020

  • 12 December 2020
  • 5 mins reading time

US political backdrop

The result of the US election has made Democratic control of both houses of Congress less likely. We’ll find out for certain in January when Georgia’s two senators will be confirmed following run-off votes. With Democrats needing to win both seats to win control of the Senate, the expectations of generous fiscal stimulus from a Democrat-controlled Congress have been diluted.

Vaccine boost

However, a boost to investment sentiment was provided by various pharmaceutical companies reporting positive results from vaccine trials. The challenges of manufacture, storage, distribution and administering the vaccines remain, but the advent of an effective treatment means that a return to more normal circumstances could begin in the first half of 2021.

Positive prospects for equity…

What’s more, research from Schroders Investment Management indicates that the economy is moving out of retraction and into the early stages of recovery. As a result, we continue to favour equities as they ought to benefit most from economic recovery. Within this asset class, we anticipate that equities in emerging markets are likely to post the sharpest growth as the virus contagion particularly in Asia appears to have been kept under better control than has been the case in a number of western countries.

…less so for government bonds

Turning to bonds, we still feel that government bonds are expensive, but some US government bonds are beginning to show signs that they could become useful as a counterbalance to short-term disappointments over the coming months. Finally, with more decisive signs of economic recovery, we have become less keen on defensive currencies such as the Japanese yen.

Asset overview

Our general view of assets over the coming months can be summarised as follows:

Important information

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

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In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.

Forecasts of future performance are not a reliable guide to actual results. Investment markets and conditions can change rapidly and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

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