Home | Macro Outlook for H2 2021 | Roadmap – Key Drivers and Risks
The key drivers impacting the Megatrends that shape the long-term investment landscape – digitalisation, sustainability, innovation and rising middle income consumption – remain intact and are intertwined. While technological innovations drive the development of sustainable solutions, the quest for sustainability is also prompting companies to pursue innovation to achieve their goals.
Asia will add another 1.5 billion people to the middle-class by 2030, and this will generate new demand for goods and services. Investors should build their holdings over time to reap the benefits from these multi-year trends.
The growth momentum for GDP and corporate earnings should moderate in H2 2021, after a strong H1 2021 performance. Countries which led the post-pandemic recovery will continue to post robust growth, supported by loose fiscal and monetary policies. However, those that continue to struggle to overcome the pandemic face a delayed recovery.
Policymakers are unlikely to remove the supportive policies for the remainder of 2021 as they believe that the global economic recovery remains fragile. The uncertainty over when these expansionary policies will be scaled back could lead to financial market volatility as the year closes.
As interest rates are more likely to rise amid the global economic recovery, we remain selective on fixed income opportunities. We prefer short-duration bonds and Asian investment grade bonds, which are less sensitive to rising interest rates.
We remain constructive on equities given the positive overall economic backdrop, and we prefer sectors that will benefit from economic reopening, such as value cyclicals. At the same time, we think investors should maintain exposure to specific growth sectors, such as Asia ex-Japan equities, which remain driven by structural factors. US quality growth equities could come back into favour once the economic recovery moderates. Investors need to be mindful of risks, yet be prepared to take advantage of volatility as a buying opportunity.