The discovery of the coronavirus vaccine last November marked a turning point in the markets, which then began to believe in the rapid recovery of the economy after the debacle of the pandemic and in the resurgence of the most cyclical companies, severely punished by the paralysis of the activity. But the return to normality is not being easy, the pandemic does not give truce – with new variants that have required new restriction measures – and has demanded the prolongation and reinforcement of monetary and fiscal stimuli.
This year will in any case be one of strong economic growth, inevitable after a 2020 in which world GDP collapsed to an unprecedented magnitude in peacetime. Although this recovery will come with a very different intensity depending on the geographies and will therefore influence the evolution of the financial assets of the countries.
If China, the country in which the first cases of coronavirus were detected, already managed to shake off the impact of the pandemic last year – with a rise in its GDP of 2.3% -, the United States will already be able to recover its previous level of wealth to the pandemic in the first half of this year. Europe, on the other hand, is lagging further behind and the euro zone will not be able to accommodate the Covid-19 blow in its economy until 2022, with large differences by countries and with Italy and Spain as the economies that will take the longest to reach their GDP level before pandemic.
In Latin America – where the vaccination campaign is much more delayed and where there are countries where the coronavirus continues to rage, such as Brazil – the return to normality will also be slower. Monetary and fiscal stimuli are not as powerful, although the momentum that the price of raw materials is registering plays in favor of the continent, hand in hand with the recovery in activity.
Europe lags behind in the recovery of activity
but it has in its favor the greater potential of increase of its stock
The IMF announced this week an improvement in growth forecasts for the global economy this year, from 5.5% projected in January to 6%. Although he also warned of the gap that is opening between the countries most at the forefront of the recovery and the most backward, in which the crisis will therefore leave deeper scars.
For the investor, the geographical criterion when assigning the assets of the portfolio is not key, although the management of the pandemic, the intensity of the stimuli with which it is being faced and the speed or slowness of the campaigns vaccination programs are making big differences in the respective stock and debt markets.
The investment recommendations for 2021 of the main management companies point to the need to refine more this year in the selection of securities, after the strong revaluations registered in 2020. Technology is a generalized bet and also cyclical companies with greater projection and capacity to take advantage of the first moments of the recovery, as is happening with the industry or the automotive sector. And that is where the US emerges as one of the favorite destinations: the strong growth expected for this year, thanks to the boost in public spending, reinforces the attractiveness of the US stock market, even despite the fact that, in valuation terms, it already demands to pay demanding prices. The fear on the part of the market of an overheating of the country’s economy, as a result of fiscal and monetary stimuli, cannot yet with the streak of Wall Street highs.
Technology and economic growth are also the combination that attracts investors to the Chinese market. Its complexity and the fact of belonging to an economy with significant state intervention place China still far from playing in the first division of global financial markets, but it has undoubtedly placed itself in a privileged place among emerging economies. Asian assets are this year an obligatory ingredient in diversification and China stands out among them in its own light.
The geography does not determine the investment but the level of incentives and vaccination is being very influential
The European stock market, despite the lower growth in the region, also enjoys the favor of investors due to its strong cyclical component and more attractive prices, although the delay in launching the reconstruction fund and the delays in vaccination raise more uncertainties.