Outlook 2021 - Recap

Outlook 2021 Special Event

On January 19, 2021, Wealth Stewards hosted a special event round table, titled Outlook 2021. This event bought together five experts with different areas of speciality in the financial industry to share their perspective on what to expect in terms of industry trends, financial markets and world economies in 2021 and beyond.  

The complete presentation can be viewed here: https://youtu.be/7tdSk8Gr6yg   

Below are some key takeaways, highlights and quotes from our different presenters.

Paul Ashworth

Chief North America Economist, Capital Economics 
Area of speciality: Global Economics           

Overall, we are fairly optimistic and there are two reasons for that. One is the policy stimulus  we are likely to see particularly coming through in the U.S. with the new Biden administration.  Secondly, we expect the federal reserve to remain very accommodative, they won't even think about raising interest rates for several years so that gives you a very accommodative policy environment.  

If we are right and we get a return to normalcy, I think there are still opportunities within equity markets. You would expect to see something of a rotation. Over the last 12 months, what we have seen is things like tech stocks doing particularly well, whereas those sectors that are still affected by things like physical distancing such as leisure and hospitality have lagged. I think what we could see over the next 12 months is something of a reversal of that.  

Themes and risks for 2021 

  • Policy stimulus and vaccine rollouts should drive strong economic recovery in most developed markets. 
  • Effective vaccines give us a shot at a return to normalcy. But uncertainties over production, logistics and new virus variants will persist. 
  • Central banks to leave interest rates at near-zero for at least several more years. That is goods for risky assets – but beware of bubbles. 
  • Inflation to surprise on the upside.

James Tsinidis

Portfolio Manager Munro Partners 
Area of speciality: Global Investment

Our mindset is really to protect capital first and make money second. So, when things do get difficult, we move into preservation mode reasonably quickly. 

When looking at emerging trends and areas of opportunity we really look at structural growth trends and the companies propelling them. There are several companies focused on digital transformation that are better off in this type of environment.

Some of the key investment areas by theme are: 

  • Climate Change and Renewable Energy 
  • Digital Enterprise:  Companies that are helping transition workforces to remote work. 
  • High Performance Computing 
  • E-commerce 
  • Internet Disruption: Large disruptive internet companies that continue to have runway in front of them. (ie. Facebook, Netflix, Google) 
  • Innovative Health 
  • Digital Payments: As more people move away from cash and towards online and digital cash for their purchases. (examples being Paypal, Mastercard, Visa) 
  • Looking further forward we have been quite lucky to have been positioned in tech for the last 10 years plus, and that has been a huge contributor to our funds. Looking forward to the next 30 years, we think climate change is going to be a key area. This includes an interest in renewables, decarbonization, energy efficiency and battery technology among others.

David Fingold

Vice President & Senior Portfolio Manager at Dynamic Funds. 
Area of speciality: Global Investment 

We approach the dividend policy of a company very different compared to most other analysts. Most people looking for dividends are investing for their income potential and we are not. We have had an insight, which is the companies that grow their dividends are the best performing companies of all time. In addition, the companies that grow their dividends the fastest are also less volatile than the rest of the market. On top of looking at dividend policy we look at the quality of a company. Quality is a composite of profitability, a strong balance sheet and consistency.  

“Looking forward to 2021, I believe we are exiting the recession and this is the most compelling time to invest in equities.

The market is acting exactly the way it always acts when it escapes from recession. You have small caps beating, large caps. You have got cyclicals beating defensives, you have got copper beating gold. You've got the yield curve steepening. These are the classic signs of the stock market telling us the economy is accelerating out of recession. 

These are the reasons to be optimistic. It's why all of our portfolios are near their fully invested positions. Why we've taken advantage of our flexibility to buy small caps where appropriate. Why we've got our maximum weights and cyclicals that are permitted within the portfolios. And that is the way we will remain until we get different information that makes me change my mind.”

Kate MacDonald

Vice-President, Portfolio Management and Portfolio Manager of Signature Global Asset Management 
Area of speciality: Real Estate 

2020 has served as a powerful reminder of how quickly the macro environment can change. Real estate is not a homogenous asset class. Within the property types, the impact of COVID has been uneven.  We have seen this mass exodus out of urban high-density environments in favour of a flight to suburbia. This has benefited certain suburban apartment markets as well as single family rentals.

COVID has acted as an accelerant bringing forward a number of trends that were previously  impacting real estate including work from home, e-commerce and increased data usage. 

We see risk in the property types where it’s difficult to have conviction with respect to what the future will hold for lower quality malls, and to some extent office buildings as well.

Paul Sandhu 

President and CEO of Marret Asset Management Inc 
Area of speciality: Fixed income  

One of the lessons we have learned in 2020, which is actually a really core part of our investing philosophy, is to focus on valuation. We provide exposure to bonds, but it's also important to be mindful of the composition of that exposure to bonds. We need to be cautious of how the portfolio is composed, whether it is government, corporate, high yield or investment grade bonds. 

I think it's fair to assert we are going to have better economic growth in 2021 relative to 2020. In 2020, we had a recession and a global health pandemic. Going into 2021 we have the deployment of vaccines, accommodative monetary policy globally and fiscal policy support. Those three things are going to provide a better growth backdrop in 2021 relative to 2020

I would suggest to you that in my view, it's not the beginning of a new cycle and that although we anticipate better economic growth in 2021 compared to 2020, the longer-term headwinds that will prevent a really strong level of growth and inflation are still there. We need to be mindful of how we are investing in 2021.  

Watch the Full Webinar

The complete Outlook 2021 presentation can be viewed here: https://youtu.be/7tdSk8Gr6yg