As the new decade dawns upon us, we are beginning to see the light at the end of the tunnel. The unprecedented nature of the current crisis required correctives on multiple fronts on a global scale. With many of these measures in place or in the pipeline, the much-awaited recovery is within reach, but the path forward remains arduous, nonetheless. While we can afford to breathe a sigh of relief having avoided the cliff edge, we remain wary of the tasks that lie ahead in the spirit of the much-celebrated Amanda Gordon’s “The Hill We Climb” to “have our eyes on the future”.
In Amundi’s 2021 Medium- and Long-Term Forecasts, we present a summary representation of possible evolutions of the macro-economic landscape and their impact on the multi-asset investment universe, complemented by the outlook for alternative assets. In line with previous editions, we continue to provide coverage for a multitude of narratives that are singularly relevant considering the current crisis and its ongoing aftershocks. Notably, our focus spectrum now includes ESG (Environmental, Social and Governance), a factor that we believe will play a significant role in moulding future investment opportunity sets.
There is no doubt the climb out ahead of us will be more onerous and atypical of past recoveries. Our central tenet is that policies worldwide will continue to be accommodative for as long as necessary but will be asynchronous because the Covid cycle is at different stages in different regions. The recovery ahead will undoubtedly be uneven, as economic, political, and vaccination setbacks could prove to be potential headwinds to the structural shifts to come. Global economic rehabilitation is bound to be slow yet steady, as authorities maintain a watchful eye on the unfolding events.
The downside scenario we articulated last year has been exacerbated by the Covid crisis from various sources that include inequality, climate change, and divergence of markets and the real economy. The various stimulus packages are only providing a short-term fix to the economy while the supply chain fail to rebuild and monetary authorities run out of manoeuvring room, resulting in inflationary pressures with lagging demand. While this may be a black swan event, experience has taught us the perils of ignoring the rare events.
Amid the gloom lies the distinct possibility that the multitude of ongoing vaccination programmes prove to be successful. In the spirit of Schumpeter’s creative destruction, we have pondered the likelihood of a return to the “roaring 20s”, where from the embers caused by the crisis arises a reengineered economy, with novel industries sprouting productivity gains paired with revamped demand allowing orderly deleveraging. However, we are keeping in mind that this broad range of narratives prepares us for any turning points in the paths ahead to come befitting our role as the architects of Fate.
There is no doubt the climb out ahead of us will be more onerous and atypical of past recoveries