Citi Private Bank has released its Outlook 2021: The New Economic Cycle: Investing for a Post-COVID World. The twice-yearly publication provides in-depth insights into the global economy and financial markets for the coming year and highlights multi-year “unstoppable trends” for client portfolios. This edition outlines why this is a remarkable time to be an investor. Just as the pandemic changed the price of every security when it arrived, the departure of COVID will mark the beginning of a new economic cycle, creating new opportunities for investors.
Citi Private Bank expects 2021 will benefit from an economy that demonstrated resilience in the face of the worst global healthcare crisis in more than a century. 2020 was an opportunity for the world to “test drive the future” and make way for growth as the pandemic ebbs. The tailwinds for 2021 are underappreciated: our financial system is strong, government actions to protect individuals and businesses have been effective, technological innovation continues to accelerate and there was a successful scientific sprint that developed an effective vaccine in record time.
“The investment opportunities in this new economic cycle will reflect many new realities, shaped by the impacts of technology upon our lives during this pandemic, as well as upon the values that we share,” said David Bailin, Chief Investment Officer of Citi Private Bank. “Our optimism going into 2021 is buoyed by strong financial institutions, high household savings and growing confidence levels among businesses and consumers alike. We’re also seeing increased investor optimism due to low global interest rates that will enable a full economic recovery.”
COVID caused many asset valuations to deviate from their long-term averages. Citi Private Bank suggests that going into 2021, these valuation distortions value will unwind. There will be numerous beneficiaries, including “COVID cyclical” sectors, such as financials, industrials and real estate, as well as hotels, restaurants and airlines.
Other factors that Citi Private Bank notes make this an especially important time for investor action: an economy that will recover more quickly and robustly than previous downturns, financial stimulus in amounts never seen before, technological innovation, and the repricing of securities tied to the most negatively impacted business sectors. Citi Private Bank suggests that investors not hold excess cash and wait for a “better entry point.” Instead, the bank recommends that investors be fully allocated and invested after deciding on how much cash they’ll need for the next 5 years.
2020 also proved the staying power of our “unstoppable trends,” especially digitization, the rise of Asia, the greening of the world and longevity. The exposure of portfolios to these trends should be increased as a proportion of overall equity ownership. We’re also recommending modifying the ratio of equity to debt to reflect the interest rate environment and the numerous undervalued opportunities in global markets. In contrast, fixed income portfolios should only reflect the best yield opportunities across the globe. For qualified investors, the bank recommends certain capital market strategies that can create income from market volatility.
The full report, a summary version, short videos, and other materials can be accessed via the Citi Private Bank website here.
About Citi Private Bank:
Citi Private Bank is dedicated to serving worldly and wealthy individuals and families, providing customized private banking across borders. With around $500 billion in total client business, the franchise serves clients across 50 cities in over 100 countries. Citi Private Bank helps clients grow and preserve wealth, finance assets, make cash work harder, safeguard assets, preserve legacies, and serve family and family business needs. The firm offers clients products and services covering capital markets, managed investments, portfolio management, trust and estate planning, investment finance, banking and aircraft finance, art advisory and finance, and sports finance.
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