2021 Market Outlook

20 January 2021

The multi-year bull market came to an abrupt halt in 2020, as the COVID-19 pandemic brought global growth to a standstill sending share markets lower. However, as central banks swiftly cut interest rates and ramped up quantitative easing programmes, and with accelerated progress on a vaccine, a majority of first-quarter losses were erased in just a few months.  

As the calendar turns, our ANZ Investments team looks at some key themes heading into 2021.

1. A healthy bounce in global growth

As we look ahead to 2021, we are optimistic on the outlook for global growth and expect a healthy return as the global economy claws its way back towards pre-COVID levels. 

The vaccine rollout will be the focal point of the recovery, but the increasing likelihood of fiscal stimulus will further strengthen the case for a strong recovery.

2. Long-dated bond yields in the US look to have bottomed

After tumbling to record-lows in March, long-dated bond yields in the US stabilised and began to move higher. 

The combination of more fiscal stimulus and growing inflation expectations should see these long-dated yields continue to trend higher.

3. What New Zealand looks like in a post-COVID environment

After stemming off a substantial spread of COVID-19, the New Zealand economy (domestically at least) was able to reopen after a relatively short lockdown. 

However, as the global economy catches up, New Zealand will face some challenges around when and how to re-open its borders.  

Another challenge for New Zealand will be central bank policy. The Reserve Bank of New Zealand has hinted that negative rates could be on the cards. While a sluggish recovery may see further accommodative policy, the prospect of negative rates has drawn criticism for its role in rising asset prices – most notably the domestic property market. 

We see sunshine on the horizon

Despite positive returns for a number of global equity markets in 2020, the pandemic and ensuing consequences made it a tough year for most. 

However, the work we are seeing in the vaccine field has us optimistic on the outlook for 2021. Still, it would be a mistake to think we won’t see periods of heightened volatility. 

With that said, economic cycles can provide opportunities and with ANZ’s active management approach and long-term focus, we are confident in our investment thesis through these periods of uncertainty. 

Important information

This material is prepared by ANZ New Zealand Investments Limited (‘ANZ Investments”) as at 31 December 2020 and is subject to change.  All statements and figures are accurate as at 31 December 2020.

While ANZ Investments has taken care to ensure that this information is from reliable sources, it cannot warrant its accuracy, completeness or suitability for your intended use. To the extent permitted by law, ANZ Investments does not accept any responsibility or liability arising from your use of this information.

Not investment advice: This document is for information purposes only and is not advice. Investors should obtain independent financial advice prior to acting in reliance on this document.

Performance: Past performance is not indicative of future performance. The actual performance realised by any given investor may be negative or positive. 

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