The outcome of the Georgia runoff elections in the US will be a critical one because if the Democrat candidates win that will have substantial implications for the markets going forward?
The Georgia runoff is going to be particularly interesting. It really sets the tone for the start of the year. If you get the Democrats, then there will be a blue wave and we are going to get a pretty sharp cyclical rally. The interest rates will pop a little bit in the US on the fact that there is going to be additional stimulus in may be infrastructure and more money in consumer pockets. So GDP for 2021 is going to be quite strong for the US. There will probably be a move with the financials as well.
Regardless of the Georgia runoff and whoever wins, we will get cyclicals and value making a comeback as the economy should grow above 5% in 2021, creating a really good backdrop for value in the cyclicals.
A new mutant variety of the coronavirus has wreaked havoc in various parts of the world. A case in point is the UK announcing a fresh set of restrictions and we may see lockdowns in Germany too. How are you looking at the developments as many nations have started the vaccination as well?
We have pretty muted growth expectations for overall global growth. US GDP was somewhere around 2% in the first quarter. Only from the second and third quarters one starts to see a real ramp up in economic activity and with that earnings growth as well.
We do think that global growth is going to be pretty strong like led by China. The US will go back to cyclical pain. Companies with overseas exposure could see better global growth going forward, especially in the back half of the year. It is something that we are very concerned with and we track that by looking at analysts’ estimates.
