Press release
Northern Trust 2021 Outlook Says Strong Economic Growth Likely as Vaccination Reopens Economy
V-Shaped Recovery, but Muted Investment Returns Expected U.S. High Yield a Sweet Spot Amid Continued Low Rates CHICAGO & LONDON--(BUSINESS WIRE)-- Northern
About this update from Northern Trust Corporation
[{"type":"text","content":"\n V-Shaped Recovery, but Muted Investment Returns Expected\nU.S. High Yield a Sweet Spot Amid Continued Low Rates\n\n CHICAGO & LONDON--(BUSINESS WIRE)--\nNorthern Trust, a leading global asset manager with $1.3 trillion in assets under management, expects strong economic growth as Covid-19 vaccination reopens dormant parts of the economy and pent-up demand fuels consumer spending.\n\n“We expect positive returns across most equity markets in 2021, but given already strong market valuations they will be unlikely to reach the surprisingly robust levels realized in 2020,” Northern Trust Chief Investment Officer Bob Browne said. He added, “We anticipate interest rates remaining low and recommend investors take on duration risk where appropriate.”\n\nThese views are part of Northern Trust’s 2021 Outlook. This report builds off the firm’s long-term Capital Market Assumptions report, a forward-looking, historically aware five-year forecast that guides the firm’s strategic asset allocation recommendations.\n\nThe forecasts within the outlook reflect the effect of the pandemic, which will still loom large as near-term growth will be muted by social distancing and other restrictions globally — but the markets will take comfort in the high likelihood of major vaccination progress by mid-year.\n\nInflation Stays Stuck\n\nFor the fifth consecutive year, “Stuckflation” is one of the themes behind expectations in Northern Trust’s outlook – defined as prolonged subdued inflation. “While there’s a risk that increased economic demand will test our Stuckflation theme, we expect inflation to remain at or below central bank targets,” said Wouter Sturkenboom, chief investment strategist for Europe, Middle East, Africa and Asia-Pacific at Northern Trust Asset Management.\n\nHigh Yield Found Most Attractive\n\nThe 2021 Outlook predicts a V-shaped recovery, with U.S. high yield bonds offering investors a sweet spot among returns that are expected to be moderate among most other asset classes.\n\nThe firm’s return forecast for U.S. high yield bonds is 4.9%. Improving credit fundamentals and declining default rates — which, when excluding retail and energy sectors, are likely to fall as low as 2% — are expected to serve as tailwinds. Its base case of interest rates declining even more, improving economic growth and a year of “reopening” should benefit cr...