Global equity markets started the new year on a positive note. Solid earnings reports for Q4 2020 and good progress in the vaccination campaigns (at least in some parts of the world) spurred investors’ risk appetite once again.

The US central bank Fed expects inflation to pick up in 2021, albeit not to the degree that would impact the central bank’s current policy.

After just two months in office, the Biden/Harris administration came up with a monumental USD 1.9 trillion stimulus bill which is expected to add up to 3.0% to the US GDP.

The Swiss economy contracted by 3.4% in 2020, which is less than the US (-3.5% in 2020) or the Eurozone (-6.8% in 2020). However, it is remarkable that Switzerland is expected to grow by +3.3% in 2021, indicating that last year’s devastating effects on domestic GDP would almost be fully recovered.

With the end of the pandemic in view and the ongoing fiscal stimulus across the globe, the medium- to long-term investment case for global equities still looks compelling. However, there could be some short-term challenges unless additional (positive) triggers confirm investor expectations.

We see an active approach with a strong tilt towards quality attributes as a critical success factor in the current environment. In that regard, we continue to advocate for a balanced portfolio construction considering both value and growth stocks (so-called barbell strategy).

Investors ought to better retain a cautious attitude towards fixed income markets, as longer-dated yields are expected to face upward pressure first from a strong comeback of economic growth and later from higher inflation.