The attack on the Capitol may have threatened the lives of federal legislators and Capitol police officers, but the most it achieved was to interrupt, briefly, a ministerial procedure. But the question of real, lasting – and legal – accountability will fall to Biden, and his nominee for attorney general, Merrick Garland. They will decide whether to continue existing investigations and potentially start new ones.
Salman Ahmed (Fidelity International) | Georgia run-off elections on 6 January handed the Democratic party effective control of the US Senate with a slim majority that will limit the ambitions of a Biden presidency. However, this will be able to boost fiscal spending to help the economy recover from Covid-19 and grow by more than 7% in 2021. This further strengthens the reflationary thesis, but means a potential taper tantrum is top of the list of factors we are watching.
China will confirm its transformation into the world’s largest economy in 2028, five years earlier than previously predicted. This is the result of the “ability” with which the Asian giant has managed the coronavirus crisis and its greater relative impact on the large Western economies, according to the latest edition of the World Economic League, produced by the Center for Economic and Business Research (CEBR).
Yesterday’s assault on the US Capitol by Trump supporters on the grounds of election fraud is an episode of violence not seen in the almost two and a half centuries of the existence of the US,” Banca March’ analysts note. What is suprising is the fact that investors ignore that “this is a direct attack on democratic institutions”, Link Securities points out.
For India, the sharp fall of domestic demand led to a huge decline in imports that drove the current account into surplus, giving the country savings during times of crisis. The Philippines also had a balance of payment surplus as its imports collapsed, driven by the large drop in investment and contraction in consumption, which was unprecedented. But those factors, coupled with low rates domestically and externally, pave the way for not just a financial market rebound but also an economic recovery in 2021, as funding conditions are favourable and balance sheets trimmer.
Dolf Gielen and Morgan Bazilian via The Conversation | The global shift to clean energy will also have geopolitical implications for countries and regions, and this will have a profound impact on wider international relations. Kerry, with his experience as secretary of state in the Obama administration, and Biden’s plan to make the climate envoy position part of the National Security Council, may help mend these relations. In doing so, the U.S. may again join the wider community of countries willing to lead.
Morgan Stanley | This liquidity tsunami will continue in 2021: we estimate another $2.8 Tr . This is more than double the liquidity that central banks injected in any previous year. However, this liquidity does not find its place in the financial markets immediately. In fact, $4.5 Tr are currently deposited in monetary funds in the US.
Fabrice Jacob (JK Capital Management-La Francaise) | As we are approaching the end of the year, it is time for us to stick our neck out and make some predictions for 2021, especially for our key investment universe that is China, which has been a star performer for the second year in a row (MSCI China gained 20.4% in 2019 and so far this year, as at 11th December 2020, another 23.3%).
Mobeen Tahir (Wisdom Tree) | The rollout of the vaccine worldwide and its impact, along with everything else that might happen next year, remain uncertain. Thus, what could move markets in 2021? We endorse the notion of a high-quality core equity exposure complemented by targeted growth opportunities – particularly in spaces like cloud computing, AI or clean energy. Sectors built on innovation will remain exciting as markets can never fully price in their growth potential – for innovation is, by definition, new and something that stimulates growth.
Keith Wade (Schroders) | Clearly, Japan’s debt is significantly higher than the US’. However, it is stable rather than rising. This reflects the poor position of US government finances before Covid-19, where the budget deficit was running at 6.3% of GDP at a time when the economy was doing well with unemployment at less than 4%, a 50-year low. (In net terms the comparison is less stark with Japan at 180% GDP versus 114% in the US).