FTSE 100 expected to outperform S&P 500 during 2021 – Capital Economics

Adam Hoyes, Assistant Economist, at Capital Ecomomics, explains they see United Kingdom equities outperforming during 2021, as some of the headwinds that they faced in 2020 fade or even act as tailwinds.

Key Quotes: 

“We think that investors will eventually look through these near-term risks as vaccine rollouts progress and restrictions are eased.  This may be particularly true in the UK, where the rollout of the vaccine has been especially rapid. As a result, we expect the sectoral rotation towards coronavirus-vulnerable sectors to reassert itself later in 2021, to the benefit of UK equities."

“Now that the uncertainty about the future relationship of the UK and EU has been removed and a “no deal” scenario avoided, we think that it is more likely that the discount that UK equities have been trading at since 2016 will gradually unwind a little, rather than widen further.”

“The upshot is that we generally expect UK equities to outperform those in other DMs in 2021. We forecast the MSCI UK Index to end the year at around 2,100, an increase of ~16% from its current level, compared to our forecasts of a ~8% rise from the MSCI USA Index and a ~10% rise from the MSCI EMU Index. This translates into a forecast for the FTSE 100 to end the year at around 7,500, compared to around 4,200 for the S&P 500.”