Just as the 2020 shutdown of much of the global economy by the coronavirus pandemic was unprecedented, the recovery this year is likely to be unlike any that preceded it. Economic activity is reviving far more quickly than anticipated and has already produced a V‑shaped recovery in some countries and regions. Growth looks set to accelerate further in the second half of 2021, particularly in the US.
However, the economic policies of governments and investment fundamentals have both been reshaped in ways with which financial markets are still coming to terms, while a high degree of unevenness and uncertainty persist. We think this process will create both opportunities and risks in the second half of 2021, highlighting the potential benefits of an active approach to investing that involves creativity and thinking outside the box.
We are living in uncharted territory, with many of the typical features of an economic recovery turned on their heads: Valuations are elevated, personal savings are robust and debt levels are soaring. Nonetheless, we have identified five key themes we believe will drive the performance of markets over the coming 12 months and beyond.
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