As the curtain comes down on 2020, and rises on 2021, I’m sure I’m not alone in hoping that next year will return some normalcy to society. From the enormous personal, social and economic toll of the pandemic, to civil strife and a bitterly contested election, 2020 has been unlike any year in generations.
For investors, 2020 was a rollercoaster, to put it mildly. From the historic selloff and volatility in March to the rebound later in the year — and a lot of swings back and forth in between — the year was one that challenged all of us. However, throughout all the ups and downs of 2020, one feature held steady: more and more investors turned to iShares ETFs to navigate the markets. They helped provide liquidity when it was largely frozen in the depths of the selloff, and they offered tools to rebuild strategic positions or access tactical opportunities throughout. They proved their worth to investors time and time again during the year.
Of course, the legacy 2020 will be with us for some time to come. That is the main theme of the 2021 Outlook from the BlackRock Investment Institute (BII), representing BlackRock’s best thinking on what the roadmap for 2021 looks like, and how to navigate it.
As BII notes, the COVID-19 pandemic has accelerated profound shifts in how economies and societies operate. These transformations run across four dimensions: sustainability, inequality, geopolitics and the joint fiscal-monetary policy revolution.
Three of BII’s new investment themes — The new nominal, Globalization rewired and Turbocharged transformations — reflect these shifts. Taken together, they call for a fundamental and immediate rethink of portfolio allocations.
The pandemic has put a spotlight on underappreciated environmental, social and governance (ESG) factors such as employee safety, while support for climate change mitigation has swelled amid extreme weather events. Rising income, wealth and racial inequalities are fueling populism, with possible tax increases for the wealthy, higher minimum wages and threats to central bank independence. COVID has accelerated geopolitical trends such as a bipolar U.S. China world order and a rewiring of global supply chains.
The pandemic has also sparked a policy revolution by bringing unprecedented cooperation between fiscal and monetary authorities. The BII sees no appetite for fiscal austerity, unlike in the aftermath of the Global Financial Crisis. Rather, the politics of inequality will likely drive continued government spending and bigger debt loads. Expect pressure on central banks to maintain low interest rates, given the surge in debt to deal with the economic fallout of pandemic.
1 Depending upon your investment objectives, these may be some funds to consider with your financial advisor. For additional funds on our platform, please go to www.iShares.com.
Originally Posted on December 7, 2020 – iShares 2021 Investment Outlook and ETF Implementation Guide
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