Equities to continue marching forward in 2021 - Danske Bank

FXStreet notes that COVID-19 developments continue to be the main driver of the global economy. Short-term headwinds strengthen as covid infections stay high but the beginning of the vaccine roll-out provides brighter prospects for the future. Downside risk factors have come down following the UK-EU Brexit deal and lower risk of new US-China trade war with the election of Biden and economists at Danske Bank continue to be positive on equities over the coming year.

“We expect restrictions to be with us for most of Q1. An increase in social gatherings in December over Christmas and New Year has pushed the R rate above one again, but as social gatherings typically decline significantly in January, this should help to push R back below one. A new obstacle to controlling the virus spread has shown up, though, in the form of a more contagious variant of the virus which appears to have originated in the UK.” 

“On the positive side, the vaccination process has started and the most vulnerable groups are expected to have been vaccinated by the end of Q1 or early Q2. This should help reduce mortality and hospitalisation significantly. In addition, warmer weather will help to reduce contagion. We thus expect the removal of the majority of restrictions by Easter in early April, with immunity being adequately achieved by the time colder weather comes back in the autumn.”

“The number of risk factors have also come down over the past months. The UK and EU finally agreed on a last-minute Brexit deal and the election of Joe Biden as US president has removed the risk of a new US-China trade war. Hence, once the vaccine has been rolled out, the sky should be getting brighter for the global economy.”