LPL Research “Outlook 2021”, is now available in a digital version and as a downloadable PDF. The report, “Powering Forward,” contains investment insights and market guidance for 2021, a year that will bring a new U.S. president amidst the global COVID-19 pandemic.
In Outlook 2021: Powering Forward, LPL shares views on stocks, bonds, interest rates, the economy and the post-election policy environment, all in the context of new challenges and new opportunities. Key insights and forecasts discussed in the Outlook 2021 report include:
- Policy: We expect global central banks to remain supportive and for individual economies to continue to refine their response to COVID-19. In the United States, what will likely be a divided government may help limit new taxes and regulations, while still supporting additional fiscal stimulus that could include high-priority items for both Democrats and Republicans.
- Domestic Economy: Continued progress in the response to COVID-19, including further stimulus, will be the key to sustaining the recovery. COVID-19-impacted service industries may be the last to bounce back. We expect some of the accelerated innovation that came with the COVID-19 response to have a positive long-term impact. We forecast 4–4.5% US gross domestic product (GDP) growth in 2021.
- International Economy: Emerging market economies may lead in a global rebound. We believe growth in international developed economies may lag behind the United States, although a strong fiscal response may help Japan. We forecast global GDP growth of 4.5–5%.
- Stocks: An earnings rebound in 2020 and strong earnings growth in 2021 may allow stocks to grow into somewhat elevated valuations. Cost efficiencies achieved during the pandemic may persist. We see an S&P 500 Index fair value target range of 3,850-3,900 in 2021 with potential for upside with better-than-expected vaccine progress.
- Bonds: Inflationary pressure is likely to be limited, and the Federal Reserve (Fed) is expected to keep rates low, but economic improvement and even normalizing inflation could put upward pressure on rates. We see the 10-year yield finishing 2021 in a range of 1.25–1.75% with a bias toward the lower end.
“2020 has changed us, the way we do business, the way we connect. In 2021 we restart the engine, but we’re not driving toward the same world we left behind in 2019,” said Burt White, LPL Financial managing director and chief investment officer. “There has been damage to areas of the economy that may never fully recover, but there are other areas that will adapt, reinvent themselves and help reinvigorate growth. There are still risks to navigate in 2021, but it’s time to get back on the road.”
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Important Disclosures
Please see the LPL Financial Research Outlook 2021: “Powering Forward” for additional description and disclosure.
The opinions, statements and forecasts presented herein are general information only and are not intended to provide specific investment advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Any forward-looking statements including the economic forecasts may not develop as predicted and are subject to change based on future market and other conditions.
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