Macroeconomic Themes to Consider in Q1 2021

on Jan 12, 2021
Updated: Dec 19, 2022

The end of the year holidays are behind us, and investors prepare for what 2021 has in store. The world seems to be in a race against time as the vaccination efforts are slow due to the unprecedented scale of the project. 

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Financial markets started the year on a relatively calm note if we discount Bitcoin from this statement. The digital currency dropped a whopping 20% yesterday, only to recover most of the lost ground by the time of writing this article.


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As earnings improve, valuations should contract. The stock market, and especially the one in the United States, has been a key driver of volatility and things are unlikely to change this year. However, the closer the world gets to the end of the pandemic, the stronger the shift to cyclical markets like the U.K. and Japan. Emerging markets equities should benefit the most should the dollar continue to decline. Finally, “green” companies, the ones involved in green projects, should do well as the world turns its attention to climate change.


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The price of oil is key in the commodities space. It recently moved back above $50 on unilateral production cuts from Saudi Arabia. If the price of oil finds an equilibrium around $50 (WTI at $50 and Brent at $55 is the consensus), the world has a better chance of tackling inflation expectations and adjusting policies to adapt to the 2020 negative oil prices shock.


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The economic recovery should continue throughout the world – in some parts faster than in others. Asian-Pacific economies should lead the recovery as Europe starts the year in lockdown mode. More stimulus from the United States is expected in the first quarter of the year, and vaccines rollout should boost consumer confidence.

Everything is virus-dependent. Science has provided a solution to the pandemic, and the most respected health agencies in the United States and Europe have given their green light to vaccination. Now it is time to deploy all resources to the fast and safe delivery, so the economic recovery picks up steam.

The United States economy is expected to grow 4.7% this year, but it all depends on how fast the vaccines are rolled out. Every delay has a strong impact on the economy, as shown by the Non-Farm Payrolls report in December – 140k lost jobs in only one month.