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C WorldWide Global Equities Outlook 2021

Global Equities

BNP Paribas Asset Management

We prefer what we know and can control. Covid-19 was frightening as it took control of the world and created uncertainty. It caused the most pronounced and fastest decline in economic activity since World War II – a flash recession. With previous expectations of 3% global growth in 2020, we will probably end up closer to minus 4% – a whole 7 percentage points difference – and this, despite extreme stimulus packages. In the past, recessions and bear markets have travelled in tandem. Significant intervention, where the US Federal Reserve purchased bonds for the equivalent of USD140 million per minute, lead to strong asset markets. These interventions will continue depending on the dynamics in interest rates and government policy. Politicians and central banks will probably not accept that an increase in government spending is destroyed by markedly higher interest rates. Is explicit yield curve control the next tool to be used?

We are facing a tough winter before we can claim victory over the Covid-19 virus. We think this ugly collective experience – the worst pandemic since the Spanish flu 100 years ago and the consequences of the massive stimulus packages – will have long-term effects on the world economy and on consumer behaviour that ultimately will be priced in by equity investors.

We have a strong belief that success as an equity investor comes with long-term thinking and a deep understanding and appreciation of the concept of compounding. So, let us look into some of the themes shaping not just the investment thinking of 2021 but also the decade ahead.

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