Key Drivers and Risks

Drivers

Vaccine-driven recovery plus loose monetary and fiscal policies

Central banks and governments will maintain their supportive economic stance.
Widespread vaccine availability towards mid-2021 will boost confidence.

Further digitalisation and technological advances

Accelerated digitalisation brought about by COVID-19 will continue and further enhance efficiency and productivity and in turn propel economic growth.
Workers who up-skill or re-skill can take on higher-value jobs, thereby improving their wages and livelihoods.

Resetting diplomatic relationships

A return to a more diplomatic, collaborative and multi-lateral approach by incoming US President Joe Biden to address key global issues such as growth and climate change.

Risks

Vaccine delays or poor efficacy

Delays in vaccine development and/or overall effectiveness will prolong economic uncertainty.
The subsequent need for further government support will increase debt burdens in the short term and potentially interest rates moving forward.

Continued global economic deterioration

The possibility of companies failing and governments’ inability to inject further stimulus – regardless of a vaccine – will result in increased unemployment, which will in turn reduce global demand and hamper recovery.

Further protectionist measures

Similar to China’s dual circulation approach amid its rift with the US, more countries may begin to look inward and focus on stimulating domestic recovery, rather than trade internationally.

Strategy

The world that emerges from COVID-19 will be different from the world we left behind pre-pandemic. The economic recovery post-COVID-19 will be broad-based, but certain trends will thrive better than others. For example, digitalisation has become the norm for social and professional interactions, while travel may never be the same again.

Uncertainties will likely remain over how this new world will be like. Yet, several long-term Megatrends remain intact: China is placing more emphasis on its domestic economy, Artificial Intelligence (AI) adoption continues to be a key engine of the new economy, and technological advances continue to open up new possibilities, particularly in Healthcare.

Increased attention towards ESG factors is a key pivot. Both governments and companies will be increasingly differentiated by their willingness to act and behave sustainably. The substantial spike in government debt in 2020 requires policymakers to tread carefully so as not to upset the economic recovery.

Looking ahead, investors should continue to tap on these long-term drivers identified, and adhere to these time-proven investment practices:

Know your own risk appetite and do not invest beyond your risk thresholds.

Maintain a diversified portfolio with an appropriate mix of core and tactical investments to minimise possible drawdowns due to unforeseen market events.

Know your own risk appetite and do not invest beyond your risk thresholds.

Maintain a diversified portfolio with an appropriate mix of core and tactical investments to minimise possible drawdowns due to unforeseen market events.