Your Q1 2021 outlook

There are lots of decisions we have to make when it comes to investing your money, from understanding how much risk you want to take and working out what investments to put your money into, to designing strategies so we can get you the best possible returns. The economic cycle and market conditions are really important when it comes to making these decisions, because they can affect how your investments perform, so we always play close attention to what’s going on.

To keep you updated, each quarter, we speak to Trevor Greetham, Royal London’s Head of Multi Asset Investments, to find out what’s been going on in the global economy and how this could have an impact on your money.

This video was recorded in January 2021 during the coronavirus outbreak. Please remember that the value of investments can fall as well as rise, and you could get back less than you pay in. 

TREVOR GREETHAM: Hello I’m Trevor Greetham, Head of Multi Asset for Royal London Asset Management, and I’ll be speaking to you for the next couple of minutes about the economic outlook and the outlook as we see it for financial markets.

We’ve had three bits of quite good news since the last update. The first being the announcement of several highly effective vaccines for coronavirus, which are now starting to be deployed around the world. The second being the election of Joe Biden as the new President of America, and he’s expected to be more in favour of economic stimulus and a bit less unpredictable than Donald Trump is. And thirdly of course is the Brexit deal. Although it’s a very thin free trade agreement, and not covering services, it’s much, much better for the UK economy than leaving the European Union transition period with no deal at all.

The markets liked these three bits of good news, so we’ve seen a big rise in stock markets, including in the UK market in the last few months. And looking into 2021, we think that positive tone is likely to continue, but we do think there are two halves of the year to think about separately.

The first part of the year is where we’re seeing a continued lockdown, the economy is still very weak, virus numbers, as you know, have been rising very rapidly and we’re getting more extreme social distancing. So that means that although people are still spending money on things like houses and on online goods and maybe cars, services are very much flat on their back. And in this period, we’re going to see economic weakness but we’re also going to see very loose monetary policy and governments won’t be talking about tax rises. And that I think will allow stock markets to continue grinding higher as we’ve seen for the last few months, particularly sectors like technology which don’t rely on face-to-face interaction.

When we start to see social distancing easing because there’s more vaccination, maybe it’s because we’re in the warmer summer months, you would expect the economies to recover very strongly. Because [of] lots of good spending on the goods side of the economy and [as] services pick up, we’ll get very strong economic activity as we come out of the hole that we’re in at the moment.  

And we’d expect to see commodity prices rise, we’d expect to see commercial property prices rise as well. And stock markets might struggle a little bit as interest rates expectations rise and people start talking about tax rises. But generally, I think that’s a pretty positive environment as well.

So very much a period to have a mixed portfolio – shares, commercial property, maybe a bit of commodity exposure, some bonds for stability. Generally, quite a positive outlook. Although things are really grim in day-to-day life, we do have that light at the end of the tunnel. Financial markets very much look forwards and we’re expecting to see perhaps not as volatile a year – hopefully not as volatile a year – as 2020, but still a pretty steady, positive year for a mixed portfolio in 2021.

I’ll be back in three months’ time to update you on the situation. In the meantime, take care.

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