2021: The macro view
Asia looks to be the land of investor opportunity this year while the UK may be best avoided, according to a sentiment survey of investment professionals across BNY Mellon Investment.
In November 2020, we asked managers and analysts from across five investment firms with BNY Investment Management for their outlook on the year ahead. In the event, we received 106 responses from our equity, fixed income and multi-asset specialists split across five of our firms: Alcentra, Insight, Mellon, Newton and Walter Scott.
Our first set of questions were about the wider economy and the possible pace of recovery. Do our managers and analysts expect to see a strong rebound – and, if so, which parts of the world do they think will perform better than others? What are the main risks on the horizon?
On the whole, our respondents were optimistic, seeing good scope for a solid economic rebound, albeit with significant potential headwinds to watch out for.
Over 70% of respondents said they expect global GDP to grow strongly or sharply in 2021, with a further 27% saying they believe GDP will grow marginally. Only 3% of respondents said they believed the economy would contract. Given this response, it’s perhaps no surprise that nearly half of the analysts and managers who responded said they would be more aggressively positioned this year than last, with only 11% saying they would adopt a more defensive stance in their investment approach.
Source for all charts: BNY Mellon Investment Management 2021 sentiment survey, 8 December 2020.
A spotlight on Asia
A clear trend also emerged when we asked which geography would offer the best investment returns. Here, Asia was the clear winner: Nearly half of respondents identified the region as offering opportunity, while the US came second with close to 30%. (This presents an abrupt shift from our 2019 survey when the same question elicited an almost mirror-image response: 43% chose the US and 30% chose Asia.)
If you add in responses from this year’s survey citing Latin America (12% of respondents) and the Middle East (2%) it seems at least some of our investment teams will be looking to emerging rather than developed markets for the best investment opportunities in the year ahead.
In contrast, with Brexit biting, only 3% of those taking the survey expect the UK to fare best this year. Almost 12% chose Europe as their top pick for opportunities.
Risks on the horizon but no real consensus
A more diverse mix of opinions were on show when we asked what the biggest risks were likely to be in the coming year. Rising debt (23%), central bank policy (17%), political risk (15%) and inflation (14%) all had a showing, but unemployment – flagged by 32% of respondents – came out ahead as the key concern. Again, a contrast with last year’s survey is telling: in Q4 2019, the majority of our specialists flagged political risk as their main worry.