According to Vanguard, Global markets have taken a beating, but there is hope on the horizon.
- We are seeing the makings of a strong but uneven global recovery.
- Health outcomes remain critical, different vaccination rates and fiscal support are likely to produce uneven economic growth.
- Virus resurgence, particularly in emerging Asia, has slowed first-half 2021 growth.
Who are Vanguard?
In what are, for many, completely unprecedented times – economic uncertainty seems like a given. However, if we were to believe the forecasts and predictions – it would be Vanguard.
With more than $6.5 trillion in assets under management, over 30 million investors worldwide and more than 40 years experience in the investment space – Vanguard have the credentials and understanding to offer the closest thing to clarity we can expect in the most uncertain times.
At Fox & Hare we were lucky enough to get front row seats for the release of their mid-year Economic and Market Outlook (VEMO) and thought our members would be interested to see what the future (probably) holds for the global economy and, by extension, their investment portfolios.
Where are we now?
Let’s start with the obvious.
The global economic outlook, as expected, hinges on global health outcomes.
According to the guys at Vanguard “no matter how we look at it, the pandemic is still far from over”.
The emergence of new variants, lockdowns and hotspots only serve to demonstrate this fact. However, despite the doom and gloom, there are numerous reasons to remain hopeful.
Macroeconomic indicators signal that the global economy is rebounding – from the sharpest contraction in modern history – faster than many had expected.
Naturally, nations that have contained the virus successfully, whether through vaccinations, lockdowns or both have tended to see their economies weather the storm better.
It is estimated that 75% of the global population will receive at least one dose of the Vaccine before 2021 is out (see fig.1) – putting herd immunity in the world’s largest economies within reach.
Fig.1 Different vaccination rates are likely to produce different economic growth.
However, an uneven global response all but guarantees continued unevenness in the recovery for the rest of this year and beyond.
So, how does the world shape up? Here are the predictions for the world’s major economic areas:
Global Growth Outlook
- US – Positive health care developments and strong fiscal support are likely to drive full-year growth of at least 7%.
- UK – Our forecast for full-year growth of around 7% is lower than it was when 2021 began, as surprising fourth-quarter 2020 started the new year at a higher base.
- China – Our expectation for full-year growth of around 8.5% is down somewhat from the start of 2021.
- Australia – Strong pent-up demand informs our view of full-year growth of around 5.5%, higher than we expected at the start of the year.
- Euro area – After a halting start, vaccination rollout has accelerated, supporting full-year growth of around 5%, and possibly higher.
- Emerging Markets – Virus resurgence, particularly in emerging Asia, has slowed first-half 2021 growth. Whether our view of full-year growth of above 6%
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