Q2 2021 Outlooks
The First 100 Days of the Biden Administration
COVID-19 | China | Climate Change
A $1.9 trillion COVID-19 relief package. A revamped and accelerating US vaccination program. A multi-trillion-dollar infrastructure plan. President Biden entered the White House with an extensive agenda. While taming the coronavirus crisis was at the top of his list, overhauling climate policies and mending US-China relations were also key priorities.
As the administration now nears its first 100 days in office, PGIM experts discuss the progress that’s been made, what lies ahead, and how all of it will impact institutional investors.
Outlooks Across Asset Classes
Second Quarter 2021 Market Outlook
The start of 2021 and the promise of broad vaccine distribution brings a sigh of relief to many. Yet, the long-term investment ramifications of the pandemic will continue to unfold over the coming years as governments and central banks adjust to the COVID fallout, industries transform to meet new demand paradigms, and households reassess spending priorities. Despite the scale of these looming developments and amid areas of rising inflation expectations and elevated asset valuations, PGIM Fixed Income believes a global economic recovery could begin as early as the second quarter of 2021.
1Q 2021 Market Review and 2Q Outlook
Just twelve months ago the outlook was bleak as the world was in the early grip of the pandemic with no vaccine in sight. Fast-forward to a year later, and there are currently three approved vaccines in the United States, with a host of other vaccines available internationally. Equity markets also extended their gains in the first quarter of 2021, but were volatile in a backdrop of U.S. political turmoil and continued COVID-19 uncertainty. As economies around the world reopen and markets rallied dramatically, the focus has shifted from fear to optimism and the strength of the coming global recovery. Jennison Associates is encouraged by the continued strong results of companies, especially those in the growth sectors of the economy like information technology and communication services.
2021 Q2 OUTLOOK
In its Q2 2021 Outlook, QMA’s Global Multi-Asset Solutions team writes that it sees upside risks to consensus growth forecasts, especially in the United States, with positive spillovers for key trading partners. Increased vaccine distribution, falling COVID-19 infection rates, and the passage of the $1.9 trillion stimulus bill have the potential to turbocharge the recovery. Pent-up demand, reopening of economic activity, and a steady increase in employment provide potent fuel for a potential economic boom.
Where Do Credit Spreads Go
Market participants often observe an inverse relationship between interest rates and credit spreads — expectations of economic growth lead to higher Treasury rates but lower perceived risk, manifesting into tighter spread levels. This historical correlation is not as apparent in recent months. Since hitting a peak in March of 2020, spreads have tightened to levels that are close to the tightest seen in the past 10 years. This suggests that even with a positive outlook on the economy and robust corporate technicals, it’s unlikely that spreads can compress much further.
