With a little over a month from now until the end of the year holidays, investment houses around the world already reveal their predictions for 2021 on major asset classes. Needless to say, the positive news about vaccines from Pfizer, Moderna, and probably others in the near future, changed the perspective about the pandemic.
With that, the perspective about economic growth changed too. If we add to this the new administration in Washington, new easing from the major central banks, more fiscal stimulus, and massive infrastructure investment in the United States, the picture can only be bullish.
However, as Christine Lagarde, the head of the ECB, was quick to note, the vaccine news is already priced in the forecasts. Therefore, with a vaccine on the table, the economic recovery will still have a hard time coming back to pre-pandemic levels.
Goldman Sachs 2021 Predictions
The famous U.S. investment bank published its forecast for the equity markets for the next twelve months. Considering that we are already in the second half of November, we can easily interpret it as an equity forecast for 2021.
The first thing that strikes the eye is that Goldman sees the S&P 500 as the best performing stock market index in 2021. It sees it as delivering almost twice the performance of the STOXX Europe 600 and more than double the TOPIX. This is more than interesting because the European stocks have long underperformed their American peers. As such, one would have thought that a rotation from the U.S. to emerging markets (MSCI Asia-Pacific) would make sense, not to mention the STOXX Europe 600.
By the time that the Pfizer announcement came in last week, the European banking sector jumped by the most. It registered double-digit growth in a couple of days, outpacing the jump in S&P 500. However, it turned out to be just an exogenous event.
Goldman Sachs is right to place more emphasis, once again, on the U.S. stock markets. The Fed is expected to ease some more in December. Moreover, there is a huge infrastructure bill worth more than $1 trillion in the pipelines with the new administration. Furthermore, while corporate tax will rise, the trade tensions will likely diminish, making it easier for U.S. corporations to reach foreign markets.
All in all, the U.S. equities find themselves again in a win-win situation. Why again? This is a similar place to the one before the U.S. elections – no matter who won, stocks were poised to rise.
And they did.