Yesterday I was joined on LGIM Talks by Madeleine King, Co-Head of Global Investment Grade Credit, and Gavin Launder, Senior Fund Manager, to discuss the market outlook in light of recent company earnings.
Key points covered in our discussion included:
- Macro: We expect a synchronised, cyclical economic recovery in 2021 – an environment in which equities have historically outperformed
- Premature removal of fiscal stimulus remains a material risk
- Equities: We’ve seen a shift from balance-sheet concerns to a focus on earnings
- Markets are looking past weak results from pandemic ‘losers’, e.g. leisure stocks, while ‘winners’ are being punished when they fail to deliver
- Credit: A new wave of rating downgrades, albeit less severe than last year, may be on the horizon
- Still, we’re close to peak leverage and some issuers may see upgrades