Time flies and half of 2021 has already been used up. With the arrival at the equator of the course, it is common for banks, management companies and analysis houses to try to draw what can happen in the markets in the second semester and based on those forecasts, adjust investment portfolios. The strategy reports that have been presented in recent days agree that equities remain the favorite option, although it will be necessary to be more selective, in a phase of economic recovery after the impact of the covid and an environment of interest rates. interest that, if inflation does not get out of control, will remain extremely low.
Rosa Duce, chief economist at Deutsche Bank Spain, recalls that “we are experiencing a period of very strong growth at a time when monetary and fiscal policies continue to be very flexible, and it seems that they will continue to be so”. In his opinion, the inflation forecast should be carefully evaluated. “While annual average rates in 2021 and 2022 are likely to be quite high in many major markets, we continue to believe that these levels of inflation will be only temporary and will decline later this year. However, during a time of such strong growth and in a rapidly changing economic environment, we believe that it is unwise to expect inflation to automatically return to the abnormally low levels experienced over the last decade, ”says Duce.
Regarding the investment strategy recommended by the German bank, Diego Jiménez-Albarracín, head of equities at the Investment Center of Deutsche Bank Spain, believes that, over the next few months, the enthusiasm of the market may persist thanks to the continuity of stimuli. “We could begin to enter a more complex period towards the end of 2021 and in 2022, when the potential tensions around growth become more obvious and the markets increasingly anticipate a tightening of monetary conditions,” explains Jiménez-Albarracín.
In this environment, investing in safe-haven fixed-income assets (such as government bonds from developed countries) offers few opportunities, according to Deutsche Bank, and it will be necessary to seek returns by assuming a little more risk, mainly in corporate bonds (including bonds). High Yield) and emerging corporate bonds. On equities, they see some potential for recovery in Europe and some emerging markets (especially Asia) as vaccination campaigns accelerate. However, with a 12-month horizon, they believe it is difficult to forecast significant gains. Much will depend on the evolution of profits, so they consider that after the good figures of the first quarter of 2021, more positive news will be needed in the following quarters to justify the current valuations.
From JPMorgan AM they point out that, although the second part of the year will be more “turbulent”, the equity markets will maintain their upward trend. “The concern about inflation will probably contribute to increasing nervousness, but it will take a lot of negative news for central banks to choose to reduce their money supply more quickly,” says the US manager in its latest strategy report.
So far this year, the shares value (undervalued companies with generally recurring income businesses) have outperformed stocks growth (those with the greatest growth potential), and turnover, according to JPMorgan AM, “still has room for maneuver.” This firm also relies on the bullish margin in Asia, although the lower rate of vaccination raises some doubts. “The role of fixed income in a portfolio is in question. In our opinion, investors should not rule out bonds, but they should try to diversify with global fixed income and seek solutions in alternative markets ”, they conclude.