In the investment outlook for 2021 (hereinafter referred to as Outlook) released on November 25, Credit Suisse pointed out that as the economy gradually gets out of the shadow of the new epidemic in 2020 and the demand continues to recover steadily, the global economic growth rate is expected to rebound to 4.2% in 2021. At the same time, zero / negative interest rates in major developed economies will normalize, which means that the stock market will still bring considerable investment returns in 2021.
John woods, chief investment director of Credit Suisse Asia Pacific region, told 21st century economic reporter that after an extraordinary year in 2020, global economic growth will gradually accelerate in 2021. Although government debt will increase significantly, it will not lead to inflation and interest rate upward.
Wu Zeen said that among the major regions or countries in the world, Chinas stock market and bond market will gradually provide more opportunities for investors in the coming year. The market unanimously forecasts that in 2021, the return of MSCI China Index will increase from 2% in 2020 to 21%, while that of CSI300 index will increase by 18% on the basis of 4% growth in 2020.
China is the first choice for investment in Asian market
China is one of our first choices for investment in Asia. Wu said that in terms of post epidemic recovery, China is ahead of most countries. At present, Chinas industrial production has basically recovered, and the next recovery road will depend on the rebound of employment.
Among global assets, based on its superior fundamental performance, Credit Suisse will prefer Asian markets including China, and in all areas, Chinas technology stocks will be more preferred.
At present, Chinas a shares account for about 12.4% of the market value of the global stock market, second only to the United States and is still growing at a high speed, but the proportion of foreign shares is only 3.8%; the scale of Chinas bond market is also the second in the world, but the proportion of foreign investment is only 2.4%. Based on this, Wu believes that Chinas huge current account surplus, positive net foreign direct investment, rapid economic growth and high returns will encourage capital flows into its stock and bond markets.
Ray Farris said that with the improvement of global economic growth, the weakening of the real yield advantage of US dollar assets, and the expansion of US fiscal deficit and foreign debt, the US dollar is expected to continue to fall in 2021, while the euro and yen will benefit, as well as the RMB, which is supported by investment inflows.
The outcome of the US election means that investors will accelerate their rush to higher yielding assets, and Asia will become a hot spot for capital inflows. RMB bonds will be sought after. As the yield is much higher than that of the same type of bonds denominated in other currencies, and the correlation with global assets is low, RMB bonds can effectively hedge the investment risk of balanced portfolio. In addition, the expectation of RMB appreciation also further increases the investment attraction of such assets. Ray Farris said.
Considering the very loose monetary policy and sustained financial support around the world, outlook points out that the sharp decline in corporate profits caused by the epidemic in 2020 is only temporary, and the corporate profits in 2021 will exceed the level in 2019, which makes the return prospect of stocks attractive.
According to the price earnings ratio and other indicators, the current global stock market valuation is much higher than the long-term historical average, but Credit Suisse said there is no need to fear that the valuation is too high.
On the one hand, the overvaluation of the stock market is driven by the environment of extremely low or even negative interest rates. On the other hand, the rapid and strong intervention of the Federal Reserve and other policy makers in response to the new crown epidemic will help ease investors risk aversion and make the market recover rapidly after the spring of 2020.
In 2021, to reduce risk aversion, policy support is expected to continue, he said. In addition to the risks of the credit crisis, there are also factors such as the recession caused by the epidemic and the increased tolerance of policy makers to inflation, which further aggravates the worries of overheating in the later period of the cycle.
At the same time, as central banks continue to reduce tail risk, the risk premium may even decline further as the economic environment stabilizes in 2021, which will support the valuation ratios currently higher than the historical average.
Among different asset classes, Credit Suisse believes that the stock market is relatively attractive. At present, the equity risk premium (ERP), calculated based on the difference between profitability and actual bond yields, is higher than the long-term average, which means that stocks can offer more attractive additional returns than bonds, the outlook said.
We are aware that ERP may be too high under uncertainty because investors demand a higher premium for holding risky assets, but these concerns will gradually ease as the economy recovers and growth recovers. Wutzen said.
Inflation tail risk increased
In 2020, the commodity market has experienced storms, and gold has set a record high for many times. Looking ahead to 2021, Mr wurzen said it was not surprising that gold had reached a new high.
According to his analysis, in 2021, the global economic recovery will continue to drive up the real demand for commodities, and the expanding monetary and economic policies may eventually stimulate higher inflation expectations, which will drag the US dollar, and generally speaking, will provide support for commodities.
Wu said that although inflation pressure is still low and will not become a major problem in the near future, the discussion on inflation is worthy of attention in view of the current policy measures and the increasing debt burden.
In fact, since the outbreak of the epidemic, all kinds of signs have made investors and policy makers around the world worry about the possibility of vicious deflation, and worry about the risk of inflation is also increasing.
For example, unusually loose monetary and economic policies, shortage of commodity supply, and blocked industrial chain have all become potential driving factors of soaring consumer prices. The possibility of this risk is further strengthened by the continuation of low interest rate policies by policy makers.
Olivier Blanchard, a former chief economist at the International Monetary Fund, previously preferred deflation as the biggest risk at present, but recently said that although high inflation is unlikely, it is not impossible.
Karen ward, chief market strategist for Europe, Middle East and Africa at Morgan asset management, also said he would not say that the world would certainly be in a long-term inflation environment, but that the probability of such a situation would not be remote.
Dario Perkins, chief European economist at tslombard in London and a former UK Treasury official, also said that countries around the world are building policy frameworks with inflation tendencies. This is the first time in generations that this has happened. The current policy response is a wartime policy response. As long as inflation remains within the central banks comfort zone, policymakers will avoid the crisis at all costs, he said. As a result, the possibility of an urgent crisis caused by the threat of deflation or the recent overheating of the economy has been greatly reduced. In terms of the risk of overheating, inflation is unlikely to become a market risk in the short term. But Ray Farris also said that there are ten main points in the outlook, one of which is to pay attention to inflation tail risk. The mild inflation of the past few decades will not end soon, but the tail risk of inflation has increased. Ray Farris said. (author: Zhou Zhiyu, editor: He Jia) source: 21st century economic report editor in charge: Wang Xiaowu_ NF
Dario Perkins, chief European economist at tslombard in London and a former UK Treasury official, also said that countries around the world are building policy frameworks with inflation tendencies. This is the first time in generations that this has happened. The current policy response is a wartime policy response.
As long as inflation remains within the central banks comfort zone, policymakers will avoid the crisis at all costs, he said. As a result, the possibility of an urgent crisis caused by the threat of deflation or the recent overheating of the economy has been greatly reduced.
In terms of the risk of overheating, inflation is unlikely to become a market risk in the short term. But Ray Farris also said that there are ten main points in the outlook, one of which is to pay attention to inflation tail risk.
The mild inflation of the past few decades will not end soon, but the tail risk of inflation has increased. Ray Farris said.