After facing one of the most testing environments in history following the Covid-19 outbreak, investors are increasingly optimistic of a strong recovery in 2021 due to recent positive vaccine news and additional fiscal and monetary stimulus announcements. However, as the unprecedented health crisis continues to lock down many parts of the world, risks to the recovery remain.
In the following update, T. Rowe Price investment leaders - David Giroux, CIO Equity and Multi Asset, Justin Thomson, CIO Equity, and Mark Vaselkiv, CIO Fixed Income - highlight the four factors investors need to focus on for 2021.
The first factor discusses the current threats and opportunities for investors, particularly as the recovery is somewhat already being priced into asset markets. The second factor examines the backdrop for hard-hit value stocks, with expectations rising of a rotation in market leadership toward cyclical sectors in 2021 - in light of the vaccine news. The third factor centres on the current low interest rate environment and the need for fixed income investors to think creatively in order to extract yield in 2021. Finally, factor four looks at how the global pandemic has accelerated economic inequality and appears to have worsened political divisions in some countries, and what this means for investors.
As many uncertainties remain, the T. Rowe Price investment leaders all agree on one crucial element in the year ahead - the need for active management. With the uneven impact of the pandemic and the recovery likely to lead to bouts of heightened volatility, strong fundamental analysis and skilled active security selection is likely to be a key driver of investment success in 2021 and beyond.
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