Bring On 2021 (quickly, please)

We can confidently say 2020 has proved to be the toughest year of Innes Reid’s 20 year history. That said, as a business and a team, we are very proud of what we have achieved and how we dealt with everything that has been thrown at us during the year, whilst continuing to deliver great outcomes for our clients.

Few could have predicted the range of challenges 2020 would pose. In peacetime, we have not previously seen so much change. You will be fully aware of affairs to date, so our focus is on what comes next and we have no doubt that 2021 will spring its own surprises and challenges.

It could very well be that the start of 2021 will be characterised by many of the same restrictions to which we have all become accustomed. But, from where we stand, there is cause for optimism as we believe that vaccine prospects are likely to make 2021 a year of global economic recovery. While markets have priced in a fair amount of the good news already, more gains seem possible as corporate profits rebound and central banks remain supportive.

We all want to believe we are entering the final straight on Covid-19, but in the short term restrictions to control the spread of the virus are set to remain. In addition, as with PPE and ‘track and trace’, distribution of the vaccine may not go to plan, delaying a return to normality. The vaccine has been the catalyst for investors to go from fear of the economic impact of the pandemic to looking at the prospects for recovery.

At the end of a challenging year, we believe the prospects for equities appear favourable. Bond yields remain low and holding cash is similarly unappealing. Economies, especially in the West, are likely to bounce back as activity recovers from the lockdowns of 2020. Households will start with higher levels of savings and pent-up demand, not least to get out, to have fun and probably, to travel.

Brexit will be behind us; as I write it is impossible to say whether there is going to be a good, bad or no deal, but these impacts may be small for our clients’ global portfolios when compared to the economic impact of the pandemic.

As the economic recovery builds, governments will look to return their budgets to more sustainable positions. Central banks will slow quantitative easing (QE) in due course. The good news is that between now and then we anticipate a strong recovery in the global economy. Policymakers will probably allow economies to run a little ‘too hot’ rather than replay austerity. As ever, we are looking forward and remain mindful of the risks.

I think we will all be glad to draw a line under 2020 and we look forward to a better year in 2021.

The team and I here at Innes Reid wish you all a Happy Christmas!