TRPrice: Midyear Market Outlook: Positioning for a New Economic Landscape

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Seemed Worth Sharing...From T Rowe Price:

Key Insights

Global growth accelerated in early 2021, led by China and the U.S. The economic recovery from the pandemic appears set to broaden in the second half.

Despite strong growth, earnings expectations could be difficult to meet. But there may be potential for earnings outperformance in some non-U.S. markets.

Strong institutional demand for U.S. Treasuries is holding yields down. Fixed income investors may want to consider credit sectors for opportunities.

China’s tighter corporate governance standards, better capital allocation, and technical innovation are expanding the opportunity set for investors.

positioning-for-new-economic-landscape.pdf

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From further reading:

-A quickening recovery is reshaping the demand in ways that could create both short‑term and long‑term potential opportunities for investors, Sharps says. Areas that could potentially benefit include the travel and hospitality industries, airlines, restaurants, and medical services.

-The economic recovery largely has been priced into U.S. equities. But earnings per share (EPS) for companies in many other markets have yet to rebound as quickly or strongly as they have for the S&P 500 Index. This creates the potential for non‑U.S. equities to outperform as the recovery broadens, he argues. “The reflation theme plays well in cyclicals, and [non‑U.S.] markets tend to be more cyclical.”

-Floating rate bank loans, Vaselkiv adds, currently offer a particularly attractive combination of relatively high yields and very short duration (an average of 90 days). This could provide benefits all the way through the next Fed tightening cycle, he argues.

-International investors still tend to focus on a handful of well‑known stocks in China’s e‑commerce and technology industries, Thomson says. He thinks more attractive potential opportunities may be available in areas such as biotech, health care, and financial technology. (in China) “China is innovating in these areas, and overall spending on research and development has accelerated.”

-Valuations. Price/earnings multiples in some sectors and stocks imply demanding profit growth expectations, Sharps reiterates. Even relatively strong second‑half results might fail to meet those expectations, generating market volatility.

Sven

Thanks. TRP has been quite good with their assessment. Bank loans and valuation plays (large and small caps) have done well this year.

Leisure sector, maybe? Delta and other more infectious variants are increasing, especially in low vaccinated states.