Going into 2021, the improving prospect of mass COVID-19 immunization with effective vaccines builds a bridge over troubled economic water. The market narrative is very different to the macroeconomic, however. This recovery happened much earlier on massive stimulus to protect investors, and markets then raced well ahead of economic fundamentals. The vaccine could be a bridge to narrow this disconnect, allowing fundamentals to catch up with high market levels. An essential condition is that policy stimulus, and the interest rate environment is maintained.
The vaccination program and economic responses will probably be the big focus for 2021. After an action-packed year for markets, 2021 could see less drama though we expect to see elevated volatility nonetheless.
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