2021 Global Market Outlook -

Russell Investments’ strategists forecast Canadian economy to grow 5% in 2021

Toronto, December 9, 2020 — Russell Investments Canada Limited has released its 2021 Global Market Outlook, offering economic insights and market forecasts from the firm’s global team of investment strategists. Regarding the “Canada Outlook” segment of the report, the team believes an effective COVID-19 vaccine should pave the way for a durable recovery.

“There is significant slack in the Canadian economy, which means inflation should remain subdued, allowing the Bank of Canada to stick to its commitment of keeping interest rates low1,” said Shailesh Kshatriya, director, investment strategies at Russell Investments. “Therefore, financial conditions should continue to be supportive and further reinforced by generous fiscal policy – a constructive backdrop for the economy and Canadian equities.”

The team’s central view on the Canadian economy is for 5% growth in 2021. Other central forecasts for 2021 include the Government of Canada’s 10-year yield at 0.9%, the USD-CAD exchange rate at $0.79 and the Bank of Canada’s target rate at 0.25%.

“Economic growth should start slowly but gain momentum as the population is gradually inoculated against the virus,” Kshatriya said. “A mobilizing economy will put to work the mountain of savings many Canadian households have built up. These savings, coupled with low interest rates, will continue to support positive housing trends and further aid the recovery. Finally, as the global economy reaccelerates, so should the demand for commodities, particularly oil, which bodes well for energy exports.”

Global market outlook

Globally, Russell Investments’ market strategists maintain a moderately positive medium-term outlook, thanks in large part to promising COVID-19 vaccine developments.

“While markets have priced in a fair amount of the good news on the vaccine, more gains seem possible in 2021 as corporate profits rebound and central banks remain on hold,” said Andrew Pease, global head of investment strategy at Russell Investments. “We believe that 2021 will feature an extended period of low-inflation, low-interest rate growth that favors equities over bonds.”

Looking toward 2021, the team also:

  • Prefers non-U.S. equities to U.S. equities.

  • Sees value in emerging markets equities. “China’s early exit from the lockdown and economic stimulus measures should benefit emerging markets more broadly, as will the recovery in global demand and a weaker U.S. dollar,” Pease said.

  • View high yield and investment grade credit as slightly expensive. “Bank loans and U.S. dollar-denominated emerging markets debt in our view offer the best opportunities,” Pease said.
  • View government bonds as expensive. “Low inflation and dovish central banks should limit the rise in bond yields during the recovery,” Pease said.
  • Believes real assets offer a pandemic recovery trade, particularly Real Estate Investment Trusts (REITs). “Sentiment for REITs appears overly bearish, while value is positive,” Pease said. “Listed infrastructure should also benefit from the global recovery, boosting transport and energy infrastructure demand.”

  • View the U.S. dollar will weaken into the global economic recovery. Since the U.S. dollar typically gains during global downturns and declines in the recovery phase, the team believes the main beneficiaries should be the economically sensitive ‘commodity’ currencies, such as the Canadian dollar. Meanwhile, the euro and British sterling appear undervalued at year-end, and the team believes both currencies should be boosted by the post-vaccine recovery.

For more details on the outlook, the team’s full report is available here.

About Russell Investments Canada Limited

Russell Investments Canada Limited is a wholly owned subsidiary of Russell Investments Group, Ltd. Established in 1985, Russell Investments Canada Limited has its head office in Toronto.

About Russell Investments

Russell Investments is a leading global investment firm providing tailored solutions and services to institutions and individuals through financial intermediaries. Russell Investments is dedicated to improving people’s financial security, leveraging an 84-year client-centric heritage rooted in investment innovation. The firm is the fourth-largest adviser in the world with C$397.3 billion in assets under management (as of 9/30/2020) and US$2.5 trillion in assets under advisement (as of 6/30/2020) for clients in 32 countries. Headquartered in Seattle, Washington, Russell Investments operates through 18 additional offices in major financial centers such as New York, London, Tokyo and Shanghai.


1 Source: Bank of Canada October 28, 2020, https://www.bankofcanada.ca/2020/10/fad-press-release-2020-10-28/

 

Contact:
Steve Claiborne, 206-505-1858, newsroom@russelllinvestments.com