2020 was the year of the Corona crisis, and 2021 can be viewed with great optimism. At least that’s what Deutsche Bank’s fund company, DWS, thinks. A rapid recovery is factored into the market, with vaccination starting in December in the United States and in Europe in the first quarter. By the end of the third quarter at the latest, it is assumed that vaccination will be widely available, so that all restrictions would be lifted by the end of the year at the latest. Nevertheless, chief investment strategist Stefan Kreuzkamp has a certain amount of skepticism. The prerequisite is that nothing goes wrong, for example that the virus does not mutate, as is now the case with the mink, that all hurdles can be overcome quickly and that the vaccines actually prove to be as effective as assumed. “There is no great margin of error,” says Kreuzkamp.
Taking this into account, DWS nonetheless expects a rapid, strong recovery. “We expect that the gross domestic product in the euro zone will reach the pre-crisis level by the end of 2022,” says Kreuzkamp. That was extremely fast, after the great financial crisis, the return took almost seven years. There is also no support from monetary policy, which will not change significantly, even until at least 2023, especially since inflation will not be a problem in the coming year because there is still enough unused capacity.
That could change in the years that followed, because despite everything, there were fewer capacities due to the crisis. The central banks would justifiably accept this, not least because of the high national debt. Italy will need more than ten years to reach pre-crisis levels. But there is no threat of a second Greece here. Ultimately, Kreuzkamp expects little influence from the change in the balance of power in America. Radical changes are not very likely, global trade should benefit from more predictability in American politics.
For stocks, the outlook is “surprisingly constructive,” says Kreuzkamp. America continues to have an advantage because Europe lacks high-growth companies and a stable exchange rate in the range of 1.15 dollars is assumed – by the way, the only DWS forecast from June that did not come true. Since April, the dollar has mainly reflected risk perception and less the less pronounced interest rate differentials. In times of high uncertainty, the dollar is in demand as a risk hedge.
One does not expect a fundamental change of favorites. They continue to rely on the big technology stocks. Kreuzkamp also does not believe in a rally in value stocks to catch up. That is possible at short notice, but overall there is no foundation for it. The clearest winner of the crisis, however, is air conditioning due to the trend towards CO2 neutrality.
The outlook for interest rate investments has also changed little. Corporate bonds, especially from emerging Asian countries, remained the focus. With yield expectations of 0.5 percent, government bonds are particularly important for limiting risk.