Q1 2021

Investment Outlook

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Overview   |   Global Macroeconomic Outlook   |   U.S. Equity   |   Developed Non-U.S. Equity   |   Global Fixed Income   |   Multi-Asset Strategies 

Key Takeaways

  • The global economy continues to recover, but headwinds linger, including lockdowns, fiscal aid uncertainty and wavering consumer confidence.
  • Declining volatility, low interest rates, healthy corporate credit markets and positive trends in other market stress measures are providing a favorable backdrop for global equities.
  • U.S. politics could yet affect markets because a belated “blue wave” would make it easier to implement policies on taxes, regulation and infrastructure spending.
  • Economic growth rates and earnings growth rates are higher in emerging markets than developed markets. EM valuations remain attractive.
  • The pandemic continues to accelerate the global economy’s digital transformation, creating opportunities well beyond the technology sector.
  • Millennials migrating from urban cores is reshaping the U.S. real estate market and creating opportunities for housing-related companies and timber real estate investment trusts.
  • Improving corporate fundamentals are providing a boost to corporate bonds, while a booming U.S. residential real estate market is highlighting opportunities in the securitized sector.
  • Among emerging markets, we favor local currency debt, particularly in countries where inflation is low and yield curves are steep.

With a handful of trading days remaining, year-to-date performance numbers indicate the market is on track for an above-average year. But as we’ve all experienced in 2020, there’s more to that data than meets the eye. Looking back, many of us have choice words to describe the year, and above-average probably isn’t one of them.

We entered 2020 recommending our clients have a clear picture of their risk exposure. Trade tensions and another Brexit deadline were among our chief concerns. But those worries soon seemed inconsequential after COVID-19 exploded into a pandemic that crashed financial markets and brought much of the global economy to a halt. Despite these extraordinary circumstances, our recommendation remains the same: Invest with conviction but understand the risks you’re taking.

Overcoming Adversity

When I think about what it took to get to where we are today, I’m awed by the resilience of individuals, communities and institutions. Governments and central banks implemented globally coordinated fiscal and monetary stimulus to help stabilize the economy and inject timely liquidity into the markets. In a matter of months, medical researchers worldwide developed multiple effective vaccines to combat COVID-19. The disease has taken an enormously tragic toll, but the mortality rate is falling as medical professionals continue to develop more effective treatment protocols.

As an investor, I’m also awed by our society’s adaptability. Most of us have adjusted to life under pandemic restrictions. Some businesses continue to struggle, while others are breaking new ground as key trends expand and accelerate. From telemedicine and videoconferencing to 5G and electric vehicles, businesses and consumers are quickly adapting to timely innovations. We’ll highlight some of those changes and what they mean to investors in this issue of Investment Outlook.

Approaching 2021 with Confidence

Never underestimating humanity’s collective power to overcome adversity will be a significant takeaway from this unforgettable year. We’re close to wide distribution of highly effective vaccines that medical scientists believe will slow and eventually stop the spread of COVID-19.  Economic growth is improving. And, after a lost year, we expect corporate profits to approach pre-pandemic levels by late 2021. Lastly, U.S. election results have lessened political uncertainty, and we’re hopeful our national leaders can agree on further stimulus to support the individuals and businesses the pandemic has hurt the most. 

Despite these positive trends, the coming months of the pandemic may test your resolve. As always, we urge you to maintain a focus on your long-term investment objectives. In the near term, execute your investment strategy confidently and with a clear appreciation of the risks you’re taking.

We wish you all the best in the new year. Thank you for investing with us.

Q1 2021 Investment Outlook Resources

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References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

International investing involves special risk considerations, including economic and political conditions, inflation rates and currency fluctuations.

Alternative mutual funds that hold a variety of non-traditional investments also often employ more complex trading strategies than traditional mutual funds. Each of these different alternative asset classes and investment strategies have unique risks making them more suitable for investors with an above average tolerance for risk.

Diversification does not assure a profit nor does it protect against loss of principal.

Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.

Mutual fund investing involves market risk. Investment return and fund share value will fluctuate. It is possible to lose money by investing in mutual funds.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

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