Wells Fargo Investment Institute (WFII) released its “2021 Midyear Outlook: Fuel for Growth,” calling for an intensified 2021-2022 U.S. economic recovery thanks to COVID-19 vaccines, expectations for accelerated spending of last year’s accumulated private savings, historically low interest rates, and the prospect of multiple government support programs. The report notes potential concerns about rising inflation rates, tax rates, and interest rates. Still, WFII believes these issues seem unlikely to douse the economic recovery or the opportunities outlined in the report at this early juncture in the recovery.
“There is a powerful macro mosaic at work with a steadily weakening U.S. dollar, rising commodity prices, strong global equity returns, low interest rates, a robust fiscal stimulus push, and falling equity and bond volatility,” said Darrell Cronk, president of WFII and chief investment officer of Wells Fargo Wealth & Investment Management. “Strong market trends also can produce wide market divergences, making diversification and a disciplined plan to allocate cash valuable allies.”
The report provides insights about the global economy, equities, fixed income, real assets, and alternative investments. WFII expects the U.S. to lead a global economic boom that lifts world economic growth to a 48-year high this year before shifting to a still-strong but more sustainable pace over the course of next year. WFII believes that U.S. and global inflation will follow economic growth to exceed their pre-pandemic pace this year and next. The report anticipates that this vigorous economic recovery could support record corporate earnings in 2021 and 2022, sending equity prices to new all-time highs. The S&P 500 Index target range is 4,400-4,600 for year-end 2021 and 4,800-5,000 for year-end 2022.
The report highlights five post-pandemic portfolio ideas for investors to consider:
- Consider putting cash to work selectively
- Cyclical sectors and asset classes for consideration
- Fixed income strategies
- Commodity prices in an uptrend
- Equity and alternative investment strategies
Download “2021 Midyear Outlook: Fuel for Growth”