Five equities investment themes for 2021 – Morgan Stanley

In the last hours, reports that Biden's is set to announce a $2 trillion package have been boosting markets as stocks are on the rise in anticipation of a stronger economy. Adam Virgadamo, US Equity Strategist for Morgan Stanley, shares some of the high level thoughts on trends that the bank expects to shape markets in 2021 and beyond.

Key quotes

“We see a V-shaped recovery, but history tells us that every recession brings some economic scarring. We expect structurally higher government spending going forward. But it will prompt debate. There's a real possibility that higher spending means higher rates, higher inflation and sharper and shorter business cycles. All of that means higher volatility and a broader role for active portfolio management.”

“A reopening will bring some wallet share reversion, but 2020's winners aren't going to sit still and tech's giants are going to push to make this year's share gains permanent. We see opportunities in identifying how much 2021 spending patterns resemble 2020 vs. 2019.”

“The application of technology in response to the pandemic led to new ways of operating that made companies more efficient and helped protect their margins through the recession. We suspect that these efficiency gains are really just the beginning, as continued diffusion of technology across industries can boost productivity for years to come.”

“We think that the power behind green investing and the common sense investment approach of buying at lower prices mean that the market may embrace rate of change ESG investing and reward companies improving their ESG characteristics.”

“We hope that 2021 brings some return to normal. That said, remember that when it comes to investing, change will always be part of the equation. In other words, a return to normal in 2021 still means things could be a bit different.”


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