Equity Strategy Lessons for 2021

•Following the massive liquidity injections seen in 2020, a challenge for investors will be to understand and measure it better.

•There is no doubt now that Central Banks have become dominant players in financial markets. We identify two potential challenges to this. But for now, the CRIC (Crisis-Response-Improvement-Complacency) framework will help guide our thinking. 

•In credit, manufacturing, services, and inflation measures, this was not a normal recession. It will probably not be a normal recovery.

•US inflation breakevens have had important historical correlations. This was true in 2020 and should be watched in 2021. 

•ASR’s Composite Global Equity Valuation Composite has swung from being ‘cheap’ in March 2020 to being ‘expensive’ today. Resist the temptation to turn a blind eye to long-standing relationships.

•ASR’s Asset Allocation Survey indicated record uniformity among investors behind the Reflation trade. The lack of diversity in the consensus narrative for 2021 is something to worry about.

•Some believe it is too premature to be calling for a new policy regime, but there is precedent, with implications for investments.