Global Outlook March 2021

We are currently at an important juncture for both economies and markets. As I write, we are in the midst of second (and in some cases third) waves of the virus, which is being accompanied by new and more virulent strains of it. But more positively, we are also seeing the roll-out of the various vaccines across the world. These events are being characterized by many as a race between the virus and the vaccine — but at least it is now possible to see a way for the latter to win that race.

This issue, as you would expect, gives our views on the likely path of economies and markets in the light of this race. However, it is also important to bear in mind that most of the investment issues (good and bad) that we discussed before we had heard of Covid-19 are still with us. Similarly, the issues that savers faced before Covid-19 also remain, and in many cases have been exacerbated by the economic and societal effects of the virus so far. The low interest rates that have penalized savers for years are still with us and lower expectations for long-term investment returns still leave a mismatch for many, between the expectations of retirement benefits and likely investment reality. In this environment, the asset management industry must innovate in response to these lower expected returns. Diversification remains vital, multi-asset solutions are crucial, and costs must be kept low — so that a higher proportion of investors’ money is actually working for their futures rather than risking the real-terms erosion that’s currently on offer from the banks.

This issue of Global Outlook therefore touches on many of these topics including the economic backdrop, several asset class views and their potential investment implications.

In our first article Richard Dunbar, our Head of Multi-Asset Research and Jeremy Lawson, Head of the ASI Research Institute, outline the ASI Economic and Market Outlook. They reflect on one of the most extraordinary years in economic and market history and set out the potential paths for the year ahead. They see a better economic year ahead, but also the paramount importance of selectivity in security selection in an uncertain environment.

One of the pre-virus issues of interest for investors was China, and in particular U.S.-Chinese relations. In our second article, U.S.-China relations: New style, same substance, our Senior Political Economist Stephanie Kelly outlines our expectations for the Biden administration’s relationship with China. While she expects more predictability in this, she does not expect a dramatic improvement. Given that we expect these two economies to be the powerhouses of global economic growth over the next two years at least, their relationship will remain crucial importance to all investment asset classes.

Following on from Stephanie’s "top-down" view of China, Louis Luo, Investment Director in Multi-Asset Solutions, takes a more "bottom-up" view of what is happening in China.

In his article, China in 10 charts, he shows that the Chinese economy has coped with the virus better than most other large economies. He then considers "where from here?", as China’s "V-shaped" recovery moderates and as other large economies start to recover their poise.

Our next article takes us to the world of emerging market debt by Brett Diment, Global Head of Emerging Market Debt. He explains that the asset class has performed well and already reflects a lot of the expectations of stronger growth following anticipated vaccine roll-out. He still sees opportunity but feels that selectivity in security selection will be crucial, given valuations and the numerous risks ahead.

Our next article, Cyber justification — a question of security?, explores the issues and opportunities in cyber-security. This is one of a series of themes that our multi-asset team are pursuing in several of our Multi-Asset strategies. James Esland, an Investment Director within the team outlines firstly what we know from our own lives — the increasing prevalence of technology in virtually everything we do. However, the scale of the security implications of this may not always be well appreciated.The basket of stocks that the team have constructed seeks to take advantage of technology trends — but it is a dynamic basket and one that seeks exposure across the value chain.

Our final article, Fixed income’s challenging year?, perhaps improbably takes us to the "casino"! In it James Athey, Investment Director in our Fixed Income team, suggests that central bank support for markets has tilted the odds towards investors and away from the "house." With the odds of losing in bond markets (and indeed other markets) reduced due to central bank support, unsurprisingly rational investor behavior changes. Of course if one sees the "casino" as rigged, James asks, then “What happens if the central banks un-rig it?”. A question that many investors fear the answer to.


Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.

Fixed income securities are subject to certain risks including, but not limited to: interest rate (changes in interest rates may cause a decline in the market value of an investment), credit (changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral), prepayment (debt issuers may repay or refinance their loans or obligations earlier than anticipated), call (some bonds allow the issuer to call a bond for redemption before it matures), and extension (principal repayments may not occur as quickly as anticipated, causing the expected maturity of a security to increase).


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The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.