As we look to the year ahead, J.P. Morgan Private Bank polled its ultra-high net worth clients to get their views on the key investment opportunities and challenges in 2021.
Which asset class do you think will be the best performing in 2021?
Commenting on investor responses, Grace Peters, EMEA Head of Investment Strategy said: “We expect the COVID-19 pandemic to subside over the next quarter or two and for growth to reaccelerate in the second half of this year as vaccines are rolled out, mobility increases, and consumer savings are deployed back into the economy. We also expect monetary and fiscal support to remain in place, driving consumption and global trade and thus supporting modestly higher inflation. In that light, market pullbacks and periods of de-risking present a clear buying opportunity, given that the underlying cyclical dynamics of the economic recovery have not changed.”
Which sector do you think will outperform?
“Technology and healthcare are both preferred sectors that also rhyme strongly with our thematic investing around megatrends,” Peters said. “To this end, we are encouraged by some of the very strong early prints we have seen in fourth quarter earnings season, especially from technology companies, where we see multi-year trends such as 5G cloud, artificial intelligence and digitalisation continuing to drive IT spend going forwards.”
Which region do you think will outperform?
“Over 40 per cent of those surveyed believe China will outperform in 2021,” Peters said. “We also favour China, given the high growth we envisage, not just for this year, but also over the next decade whilst valuations are still reasonable. Despite having generated strong returns in 2020, the region is only just starting to see stronger capital inflows from the rest of the world. And we think those flows will continue. China’s leadership is focused on self-sufficiency through innovation and thematically we like beneficiaries of decarbonisation, 5G infrastructure, software, insurance and health care.”
“And, of course, given our positive view on technology, we still favour the US market, which retains a high weighting to well-known large cap tech giants, but more interestingly to us, plenty of other ways to access technology driven growth.”
What do you perceive as the key investment risk in 2021?
|Ineffective virus containment||45%||32%|
|Removal of policy support||21%||25%|
|An overly concentrated market||16%||21%|
“Ineffective virus containment is undoubtably top of mind for respondents across EMEA and we agree,” Peters said.
“We highlighted in our 2021 outlook that the vaccine is a key element of the economic recovery, but it is not a silver bullet as unknowns about its rollout remain. And as such, a barbell of assets that offer both secular growth and exposure to the cyclical rebound is especially important. Of course, this feeds into our investment strategy and three key pillars we focus on: navigating volatility, finding yield and seeking outgrowth by megatrends.”