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Monthly Investment Outlook - 2021 Midyear Outlook — Fuel for growth

Wells Fargo Investment Institute - June 15, 2021

Presenter: Veronica Willis, Investment Strategy Analyst, Wells Fargo Investment Institute

Transcript:

title graphic: 2021 Midyear Outlook — Fuel for growth

As the global economy emerges from lockdown, people are spending and working more. This, along with a rise in private savings, low interest rates, and multiple government support programs, are providing fuel for growth.

The economy is running faster than most of us have seen in our lifetimes, and that’s the singular feature of our investment outlook for the next 18 months.

Thanks to the acceleration of the distribution of various COVID-19 vaccines, the U.S. and China are leading the way. The global economy should follow. It’s on-pace for its strongest growth since 1984, before shifting to what we expect to be a more moderate, sustainable pace over the course of 2022.

The main risks to growth are inflation, taxes, and interest rates. We expect all of these to rise through the end of 2021. And while we should see some dampening effect from all three, it seems unlikely to douse the economic recovery or opportunities for investors.

For equities we expect corporate earnings growth in 2021 and 2022, but higher corporate tax rates eventually may restrain earnings growth in 2022.

In fixed income we expect moderate further interest rate gains. But strong issuance of corporate bonds should continue, and tax-exempt income will likely be in high-demand.

For real assets, we believe real estate fundamentals will continue to trail the economic improvement, and commodity demand should continue to be robust as supplies play catch up.

Finally for alternative investments, though the exceptionally strong returns seen over the last 12 months are not sustainable, we continue to expect a favorable environment for Equity Hedge. And believe there continues to be opportunities in long/short credit strategies.

For more and to learn our five post-pandemic ideas for your portfolio, download the Wells Fargo Investment Institute special report: 2021 Midyear Outlook—Fuel for growth.