2021 equity outlook

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2021 equity outlook

Melda Mergen, CFA, CAIA, Deputy Global Head of Equities


2021 is going to be a recovery year from COVID.

There are two different type of trends that we follow in the marketplace. One is cyclical, the other is secular. I'll start with secular.

Secular is usually these longer-term trends and creates opportunities for companies to grow earnings, their revenues, customer base for over a longer time period.

Cyclical companies, where they are much more following the economic activity in the marketplace. And what we mean by that is economies go through cycles. Because we experienced the downturn in 2020, we are expecting a recovery in 2021. And once that happens, these cyclical companies following the economic activities will start to outperform.

We believe that the secular trends, digitalization, understanding your customer by using data, are the trends that will continue in 2021, regardless of what happens with the vaccine. Those are the trends that are really helping the companies to be very strong, competitive, and create competitive advantage in their industries. They are secular trends, so they don't change very often. The interesting dynamic is though those companies with that type of secular strength, were the ones that are really outperformed during 2020 and the winners, the number of companies outperform was pretty narrow, small number. But we are expecting in 2021, they will continue to outperform, but the outperformance, the winners will extend to more cyclical stocks too.

The views expressed are as of December 2020, may change as market or other conditions change and may differ from views expressed by other Columbia Management Investment Advisers, LLC (CMIA) associates or affiliates. Actual investments or investment decisions made by CMIA and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be appropriate for all investors. Past performance does not guarantee future results,andnoforecastshouldbeconsideredaguaranteeeither.Sinceeconomicandmarketconditionschangefrequently, there can be no assurance that the trends described here will continue or that any forecasts are accurate.

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COVID-19 has not changed key long-term trends, but cyclical rotation presents opportunities in 2021.

Contact your Columbia Threadneedle Investments representative at 800.426.3750