Economy and Markets 2021: Cyclical Scenario Remains Intact

The development of the global economy will continue to be dominated by the corona pandemic in 2021. However, new fiscal programs in the USA and Europe and the recovery of China could trigger a growth spurt in the coming year. The outcome of the US elections also points to a continuation of the cyclical investment scenario. These are key results of the 33rd FERI Tagung, which was held for the first time this year as a purely online event due to the corona pandemic. "In the corona crisis, clear differences between countries and regions are now becoming apparent. While China has practically overcome the crisis and is clearly back on a growth path, Europe must expect a further decline in economic output in winter as a result of the second wave of the pandemic," said Axel D. Angermann, Chief Economist of the FERI Group. However, if the current "lockdown light" is successful in bringing the pandemic back under control, the recovery process could be resumed from spring onwards. The payments from the European reconstruction fund would then also help, which should boost growth, especially in the countries of Southern Europe, which are the main beneficiaries of the pandemic. "A new fiscal stimulus is also expected in the USA and therefore higher growth dynamics in 2021. This could also drive up inflation expectations," Angermann said.

Positive Earnings Outlook

The fact that the FERI experts expect the stock market environment to remain constructive on the whole is not only due to the expected economic recovery, but is based primarily on the continuation of the expansive monetary policy and the prospect of rising corporate profits. "The capital markets are anticipating an end to the crisis - with a discount factor close to zero, it is relatively irrelevant whether this end occurs several quarters earlier or later," said Marcus Zasada, Team Head Portfolio Management at FERI Trust. Higher growth expectations would result in rising interest rates and possible losses in the bond markets, especially in the US. "Cyclical sectors and commodities, on the other hand, would be winners in such a scenario," added Zasada. Among the key market drivers for 2021 were also ongoing geopolitical risks, as the US-China rivalry would not disappear with Biden as US president. Investors should generally prefer a growth-oriented investment strategy and also focus on megatrends, which will be further intensified by the corona pandemic. These include, for example, the topics of digitalization and sustainability.

America After the Election

An important topic at the 33rd FERI Tagung was the US elections and their consequences for Europe and the world. "The new President Biden will quickly need concrete support, also from the EU, to consolidate his position in a country that continues to be divided," said Andreas Povel, former CEO AmCham Germany, in his presentation. Topics for this could be a common strategy in the fight against Corona, support for reforms of the WHO or a multilateral solution of the China trade conflict via the WTO, Povel continued.