At last, here we are in the final month of a year none of us will forget. While doom and gloom has been the order of most days, it has been the stock market that has proven to be the biggest and dare I say, best surprise.

Who among us could have predicted 8 months after the depths of the lows we saw on March 23rd 2020, that the TSX (Canada) would grow by approximately 55% (11,228 to 17,358 close 12/2/20) and the S&P500 (US) would be up approximately 64% (2,237 to 3,669 close 12/2/20). This is a remarkable achievement which in part was the result of unprecedented government stimulus and lower interest rates.

Looking forward to 2021, RBC’s Global Advisory Committee (headed up by Jim Allworth) has put together the attached Global Outlook report (click HERE).

Some of the report highlights:

• It is expected economic headwinds will diminish, returning us to strong earnings growth and worthwhile equity returns.
• Inflation is expected to stay within an acceptable range.
• They surmise that high debt levels do not necessarily represent a systemic risk in the near-term and debt servicing costs will remain manageable.
• The V-shaped recovery we’ve seen since May, may give way to a less dynamic, possibly bumpier phase of growth.
• The US & Canada are expected to regain their pre-pandemic high ground by late 2021/early 2022.
• Some sectors crippled by the pandemic could surprise in 2021 and 2022. The strong rebound from the deep March lows suggests that investors have already paid in advance for some of that expected “return to normal”.
• Fierce competition for market share tends to drive up companies’ capital spending. Increasingly that spending has become more technology-focused. The digital economy is thought to be approaching 10 percent of U.S. GDP and growing.
• China’s rate of GDP is slowing, but they are still likely to outpace the rest of the developed economies.
• Protectionism will likely continue to be a main theme in the U.S. President-elect Joe Biden is expected to encourage the building of new manufacturing facilities in the U.S.
• Persistent debt accumulation will likely be one more factor that will keep central banks suppressing interest rates over the medium and longer term, further burdening savers and fixed income investors.
• Preferred shares remain one of the few areas of the Canadian fixed income space where investors can find 4% - 6% yields. We believe the combination of a steady demand for income and a reduced supply of preferred shares due to refinancing will support prices over 2021.

All the best to you and your families for a peaceful and relaxing December.

Libby

 

 

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