TORONTO, Dec. 17, 2020 /CNW/ - Following the global
challenges experienced in 2020, the current optimism is expected to
carry into 2021 as economic conditions continue to improve,
according to BMO Global Asset Management's (BMO GAM) Multi-Asset
Solutions Team's 2021 outlook report titled The Great
Normalization.
With rapid vaccination expected to take place in the first half
of the year, the stage is set for strong growth recovery in
2021.The services sector should be a principal beneficiary as the
in-person economy returns in the post-pandemic world. Additionally,
fiscal and monetary support, which was crucial to economies and
markets in 2020, is expected to continue into the new year.
Absolute rates are also expected to remain at historic lows,
leading to an environment supportive for equities and broader risk
markets globally.
"By mid-year we expect certain sectors, such as travel and
tourism, to bump against capacity constraints as long-delayed
holidays and other spending materialize," said Frederick Demers, Director, Multi-Asset
Solutions, BMO Global Asset Management. "As normalcy returns,
consumer spending is expected to grow and unemployment rates to be
meaningfully lower than current rates. Heading into 2021, we are
optimistic we will see improved economic conditions and better
times ahead."
Canadian and U.S. Outlook
The Canadian economy has
recovered in recent months as a result of an aggressive fiscal
response; however, it is expected to lag behind the U.S. and global
recovery. The fiscal response has led to a surge in debt, with the
federal deficit expected to exceed C$150
billion for FY-2021/22 as support for health, wage and
income support programs continue.
The U.S. economy and financial markets are expected to perform
well on fiscal, monetary and vaccine developments. The Federal
Reserve's "average inflation targeting" approach will mitigate
pre-emptive tightening on inflation pressures and interest rate
increases. There are questions around equity market valuations;
however, BMO GAM's long-term valuation modeling indicates that
equities are reasonably priced at current levels.
Equity Outlook
There is a favorable medium-term view
on equities heading into 2021 given expectations for a
vaccine-driven economic recovery and revitalized global corporate
earnings. Current positioning includes:
- Relatively neutral on Value versus Growth
- Overweight global equities versus fixed income
- Overweighted on Small-Caps versus Low-Vol stocks as a reflation
play
- Overweighted on emerging-market equities
Energy Sector and the Green Wave
Oil prices decreased
around 25 per cent this year as demand fell and inventories grew.
Widespread pandemic-induced lockdowns are a major factor in this
performance, although there was a prior excess oil supply. As
life and economic activity normalizes into 2022, oil demand should
rebound but at a slower rate than the broader pace of the
economy.
However, COVID-19 will also leave a permanent imprint on
behaviours such as business travel and work-from-home schemes.
Additionally, there is a growing emphasis on green energy projects
as Canada and other countries
focus on promoting less carbon-heavy industries.
Responsible investing continues to gain traction in the
investing industry, with a focus on environmental, social and
governance (ESG) criteria and the development of strategies that
can positively affect the world.
To view the full report, please click here.
Forward Looking Statements
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necessarily depends on future events may be a forward-looking
statement. "Forward-looking statements," can be identified by the
use of forward-looking terminology such as "may", "should",
"expect", "anticipate", "outlook", "project", "estimate", "intend",
"continue" or "believe" or the negatives thereof, or variations
thereon, or other comparable terminology. Forward-looking
statements are not guarantees of performance. They involve risks,
uncertainties and assumptions. Although such statements are based
on assumptions that are believed to be reasonable, there can be no
assurance that actual results will not differ materially from
expectations. Investors are cautioned not to rely unduly on any
forward-looking statements.
The above mentioned report has been prepared by the BMO GAM
Multi-Asset Solutions Team (MAST) and is intended for informational
purposes only. This report represents their assessment of the
markets at the time of publication. Those views are subject to
change without notice as markets change over time. The information
contained herein is not, and should not be construed as,
investment, tax or legal advice to any party. Investments should be
evaluated relative to the individual's investment objectives and
professional advice should be obtained with respect to any
circumstance. Past performance is no guarantee of future
results.
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affiliated entities of BMO Financial Group that provide investment
management, and trust and custody services. BMO Global Asset
Management comprises BMO Asset Management Inc., BMO Investments
Inc., BMO Asset Management Corp., BMO Asset Management Limited and
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About BMO Financial Group
Serving customers for 200
years and counting, BMO is a highly diversified financial services
provider - the 8th largest bank, by assets, in North America. With total assets of
$949 billion as of October 31, 2020, and a team of diverse and
highly engaged employees, BMO provides a broad range of personal
and commercial banking, wealth management and investment banking
products and services to more than 12 million customers and
conducts business through three operating groups: Personal and
Commercial Banking, BMO Wealth Management and BMO Capital
Markets.
SOURCE BMO Financial Group