Art of investments


Investment Outlook 2021

Dec 15, 2020

Investment Summary
  • Despite the recent surge of COVID-19 cases in Europe and US we believe the absence of strict global lockdowns, accommodative monetary policy, and anticipation of massive vaccination should lead to strong economic recovery in 2021.
  • Yield curve in the US is gradually becoming steeper in line with our previous expectations. We think this trend will continue next year amid higher inflation, economic recovery, and anchored short-term rates.
  • Higher oil prices and historically low cost of borrowing should boost economic growth in Russia to 3.1% y/y next year. Consequently, inflation will remain at 4% y/y on average and the CBR may start to normalize monetary policy in 4Q21, hiking the key rate by 25 bps.
  • We keep our average 2021 Brent oil price forecast at USD 50 due to recovery in global economic activity. OPEC+ intends to start increasing oil production at a rate of 0.5 mbpd from January, with the aim to ease production cuts to 5.7 mbpd in April from the current 7.7 mbpd, which is negative for oil prices in the short-term. 

Investment Preferences
  • We are Overweight (+) on European equities, which are better positioned for a gradual rebound due to more cyclical index structure.
  • We are Neutral (=) on US equities, where accommodative monetary policy and an appealing fundamental growth potential balances against relatively high valuation.

  • We remain Overweight (+) on Russian equities. Within sectors, we prefer banks, oil&gas, steel and aviation.

  • We remain Neutral (=) on Russian debt as we have a better outlook on RUB bonds vs Eurobonds.

  • We keep Overweight (+) on GEM USD-denominated debt

icon_pdf.gif   Full version of the report could be found attached.

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