It was very clear last year that there was a huge difference between the performance of the real economy and stock markets as the world tried to deal with COVID-19. While economies everywhere shrank in terms of GDP (China was the only country to eke out a positive growth rate in 2020), equities in most countries had a great year.

So, at the beginning of this year, with the UK in a strict lockdown and many other countries facing various restrictions and new variants of the virus, you could rightfully be asking whether things could change and whether we should therefore be more cautious in our investments. Can equities keep rising in 2021?

In our most recent webinar, Chief Investment Officer, Michel Perera addressed this very question, along with others from our clients. You can watch a recording of the webinar or read the article below.

Why does our outlook for equities remain positive?

Money supply from central banks has gone through the roof and they won’t raise interest rates even if inflation picks up

In the US in 2019, money supply rose 6.7%, in 2020 it went up more than 25%; in the UK, we went from 1% to 11.7%; in the eurozone, up 11%. Central banks have also pledged not to raise interest rates for a long time. The US Federal Reserve (Fed) said not until at least 2023.

Governments are supporting the unemployed and businesses to make sure they can survive the pandemic

Fiscal relief has been provided in many countries in the world including Europe and Japan, with the US providing a level of generosity never seen before. Governments are trying to make sure that those whose livelihoods have been ruined by the virus can still survive so that society can function properly, while those who work from home can keep spending and boosting the economy. The unprecedented fiscal spending is designed to tide us over until the vaccine creates herd immunity and we can go back to normal.

The net result is that we are starting a brand-new economic cycle with all the tailwinds behind us and a promise that tailwinds won’t turn into headwinds as soon as the situation improves. This is better than previous starts to economic cycles (recall fiscal austerity after the 2008/09 financial crisis). In this environment, we feel comfortable we can concentrate on selecting investments without worrying too much about politics or the economy.

Find this useful? Read more here:

• Finding income generating investments in 2021

• Time to reconsider stashing cash

• Wealth planning post-COVID-19

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.

The information contained herein is based on materials and sources that we believe to be reliable, however, Canaccord Genuity Wealth Management makes no representation or warranty, either expressed or implied, in relation to the accuracy, completeness or reliability of the information contained herein. All opinions and estimates included in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information contained herein.