Five global investment risks in 2021 – Charles Schwab


The top five global risks for investors in 2021 are all surprises to the consensus view: problems with the vaccine rollout, geopolitical and trade tensions do not subside, fiscal and/or monetary policy tightens, a “zombie” economy and interest rate/dollar shock. Whether or not these particular risks come to pass, a new year almost always brings surprises of one form or another. Having a well-balanced, diversified portfolio and being prepared with a plan in the event of an unexpected outcome are keys to successful investing, Jeffrey Kleintop, CFA, Senior Vice President, Chief Global Investment Strategist at Charles Schwab apprises. 

Key quotes

“There is potential for the stock market to pullback some of the gains if vaccine distribution, adoption, or efficacy lags, resulting in delays to the recovery timeline. Bottlenecks with virus testing capacity and turnaround times in both the UK and the US raise concerns about the ability to roll out widespread vaccination, an even larger operation. Also, we believe the market has not yet discounted the potential return to lockdowns in early 2021 should the December holidays result in new waves of cases and hospitalizations, or the potential for the virus to mutate and render current versions of the vaccine less effective.”

“The market does not anticipate any flare up in foreign policy tension in 2021. Yet, there are hot spots that could spill over into markets. US President-elect Biden has made it clear he won’t be easing trade tariffs immediately and intends to confront China on environmental and labor issues in addition to intellectual property rights. China may respond by alerting other countries that new alliances with the incoming Biden Administration against China might prompt retaliation. Australia and China have been in low key conflict over the past couple of years, but tensions have now escalated, with the potential for meaningful economic damage.  Failure to craft a post-Brexit UK-EU trade deal could lead to conflict; heightened by a transition to new leadership in Europe. There is the potential for renewed US tensions between North Korea, Russia/Syria, Venezuela, and others with interests in conflict with US goals.”

“Markets are clearly betting on continued easy policy in 2021. Premature monetary or fiscal policy tightening in major economies could slow the recovery and deal a setback to the stock market. Policymakers are unlikely to tighten policy anywhere near as rapidly following this global recession compared to recent history. But signs of less easing may prompt a market pullback, should policymakers begin to seek ways to contain runaway budgets and balance sheets.”

“Lingering structural economic impacts from the 2020 crisis and recession could slow the economic rebound. Instead of a quick return to the pre-crisis economy, it is possible we may need a longer period of structural adjustment. Continued easy fiscal and monetary policy could also result in a drag on productivity and growth from hordes of ‘zombie’ companies. These companies may use aid to make debt payments rather than fuel economic growth through hiring or spending on equipment.”

“An unexpected jump in inflation, surprise surge in bond yields or plunge in the dollar might lead to higher stock market volatility. Inflation expectations have been rising fast. Any breakout above the five-year range may spark tighter financial conditions and prompt investors to reassess stock market valuations.”

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

USD/JPY off lows, stays pressured near 142.50 ahead of BoJ policy decision

USD/JPY off lows, stays pressured near 142.50 ahead of BoJ policy decision

USD/JPY has bounced off lows but remains pressured near 142.50 in the Asian session on Friday. Markets turn risk-averse and flock to the safety in the Japanese Yen while the Fed-BoJ policy divergence and hot Japan's CPI data also support the Yen ahead of the BoJ policy verdict. 

USD/JPY News
AUD/USD bears attack 0.6800 amid PBOC's status-quo, cautious mood

AUD/USD bears attack 0.6800 amid PBOC's status-quo, cautious mood

AUD/USD attacks 0.6800 in Friday's Asian trading, extending its gradual retreat after the PBOC unexpectedly left mortgage lending rates unchanged in September. A cautious market mood also adds to the weight on the Aussie. Fedspeak eyed. 

AUD/USD News
Gold price treads water below record peak, awaits Fedspeak

Gold price treads water below record peak, awaits Fedspeak

Gold price hovers below the all-time peak touched earlier this week amid a bearish US Dollar and rising bets for more upcoming rate cuts by the Fed. Concerns over an economic downturn in China keep the safe-haven Gold price afloat. Fedspeak remains on tap. 

Gold News
Bank of Japan set to keep rates on hold after July’s hike shocked markets

Bank of Japan set to keep rates on hold after July’s hike shocked markets

The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session. 

Read more
XRP eyes gains as Ripple gears up for stablecoin launch, Grayscale XRP Trust notes rising NAV

XRP eyes gains as Ripple gears up for stablecoin launch, Grayscale XRP Trust notes rising NAV

Ripple (XRP) gained 2.3% since the start of the week. The altcoin’s gains are likely powered by key market movers that include Ripple USD (RUSD) stablecoin, Grayscale XRP Trust performance and the demand for the altcoin among institutional investors.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Forex MAJORS

Cryptocurrencies

Signatures