Monthly Investment Outlook - January 2021
- 17 January 2021
- 5 mins reading time
Over recent months, we have increased our preference for equities. We’ve focused on companies that might not have fared well during the lockdown but which look set to recover relatively well. This move was justified by the equity price gains that unfolded in December.
Our analysis suggests that there is more growth to come during what we expect to be a gradual, post-Covid-19 return to “normal”. However, we have reduced our preference for some companies that have delivered substantial stock price gains already.
Another area of interest to us is that of the Asia Pacific. This region appeared to have weathered the pandemic relatively well, and it has been posting consistently positive macro-economic data (such as jobs numbers, production levels and economic stability). As a result, we are now favouring some companies in the region with a particular interest in the industrials sector (e.g. some of the companies involved with construction, engineering and machinery production).
Closer to home, we do see some potential for UK companies to catch up with the recovery that Continental European companies have delivered in the latter part of 2020. The avoidance of a no-deal Brexit also supports this position.
Turning to fixed income, corporate bond prices have risen recently reducing our expectations for further increases. This makes them less attractive and adds more weight to our preference for equities.
In terms of government bonds, we continue to recognise the need to hold them as part of a diversified portfolio and to act as a counter-balance to some of the turbulence that we anticipate over the coming few months while vaccination and lockdown measures counter the pandemic. However, their prices are extremely high at the moment, so we do not expect to see long-term price rises in lower-risk rated government bonds such as those issued by the US, Germany and the UK.
Our general view of assets over the coming months can be summarised as follows:
Any views expressed are our in-house views as at the time of publishing.
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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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