CIBC Asset Management Perspectives—The road back to normal
White-knuckled global investors can breathe a little easier as we begin 2021. Developments on the COVID vaccine front are encouraging and consumers are sitting on a record amount of cash after restraining their spending for nearly a year. There’s a lot of pent-up demand out there, but will the global economy get too strong for comfort and force monetary authorities to start draining liquidity from the system?
Equity: The reopening of the economy benefits all equities, but some will still benefit more than others. Sectors and countries that have been harder hit stand to gain more from the recovery, with the exception of industries that have been permanently damaged. In particular, small cap companies should outperform large caps.
Fixed Income: We’re maintaining a pro-cyclical stance in global bond portfolios by underweighting developed market bonds and overweighting emerging market bonds.
Currencies: We expect U.S. dollar weakness to continue against most major currencies in 2021. Despite its rally in 2020, the Canadian dollar still qualifies as significantly undervalued against the USD and will likely continue to strengthen.
China: The rise of the Chinese consumer and the Chinese central bank on the sidelines will both support the Chinese economy. This strength will also result in important, positive spillovers for the global economy
Perspectives Video Commentary with Luc de la Durantaye