Brace for strong growth - 2021 rebound set to surprise

CIO MONTHLY | APRIL 2021

An increasingly successful vaccine roll-out, the passing of a massive US fiscal stimulus, and recently less hawkish China policy outlook all suggest that 2021 will deliver the strongest growth momentum in over two decades. With inflation set to spike near term on the back of rebounding oil prices—helping to encourage bond yields higher—the coming months could see an uplift in volatility. This may provide opportunities to strengthen portfolios ahead of likely moderating inflation in H2 2021 and better equity valuations, as macro growth drives earnings uplifts.


  • Global growth is set to rebound at a pace not seen for decades, with UBS, the Organisation for Economic Co-operation and Development and the International Monetary Fund delivering an average estimate of 5.9% for 2021. Australia’s outlook also continues to improve, with stronger-than-expected growth and jobs data over recent months leading to forecast upgrades for 2021 and 2022.
  • Factors driving the improved global growth prospects include a quickening pace of inoculations globally, a much larger-than-expected US fiscal stimulus, and a less hawkish policy outlook from China. However, challenges include the recent resurgence of the virus in a number of emerging economies, the residual risk that a mutation of the virus will delay the growth recovery, and the risk of a geo-political event occurring in the coming year.
  • Given the strength of the economic recovery, we believe there will be further upgrades to corporate earnings estimates in the period ahead. In particular, we expect earnings growth in 2022 to be revised higher during 2021.
  • Volatility is unlikely to dissipate any time soon and may intensify in coming months as a burst of short-term inflation arrives on the back of higher oil prices and cyclical growth pressures. This will present opportunities to strengthen portfolios. However, holding excess cash will continue to lead to real capital loss for some years to come, supporting our moderate risk-on stance.