We no longer support this browser. Using a supported browser will provide a better experience.

Please update your browser.

Close browser message

As a global leader, we deliver strategic advice and solutions, including capital raising, risk management, and trade finance services to corporations, institutions and governments.

Learn more about our solutions:

  

Serving the world's largest corporate clients and institutional investors, we support the entire investment cycle with market-leading research, analytics, execution and investor services.

Learn more about our solutions:

  

We are a leader in investment management, dedicating to creating a strategic advantage for institutions by connecting clients with J.P. Morgan investment professionals globally.

Learn more about our solutions:

    

Our financial advisors create solutions addressing strategic investment approaches, professional portfolio management and a broad range of wealth management services.

Learn more about our solutions:

    

Leverages cutting-edge technologies and innovative tools to bring clients industry-leading analysis and investment advice.

Learn more:

    

The latest news and announcements.

Learn more:

    

For company information and brand assets for editorial use.

Learn more:

    

The latest news and announcements.

Learn more:

    

In a fast-moving and increasingly complex global economy, our success depends on how faithfully we adhere to our core principles: delivering exceptional client service; acting with integrity and responsibility; and supporting the growth of our employees.

Learn more:

    

J.P. Morgan is a global leader in financial services, offering solutions to the world's most important corporations, governments and institutions in more than 100 countries. As announced in early 2018, JPMorgan Chase will deploy $1.75 billion in philanthropic capital around the world by 2023. We also lead volunteer service activities for employees in local communities by utilizing our many resources, including those that stem from access to capital, economies of scale, global reach and expertise.

Learn more:

    

With over 50,000 technologists across 21 Global Technology Centers, globally, we design, build and deploy technology that enable solutions that are transforming the financial services industry and beyond.

Learn more:

    

Technology Banner

For general inquiries regarding JPMorgan Chase & Co. or other lines of business, please call +1 212 270 6000.

Learn more:

      

For general inquiries regarding JPMorgan Chase & Co. or other lines of business, please call +1 212 270 6000.

Learn more:

      

2021 Global Market Outlook: What Lies Ahead in the Post-COVID-19 World?

See the key calls made by J.P. Morgan Global Research across asset classes and the global economy.

Updated: January 14, 2021

2020 is ending with a second wave of COVID-19, following the largest exogenous shock in modern history, extreme market volatility that was followed by an unprecedented fiscal and monetary response and a tumultuous U.S. election cycle. This year also comes to a close with the S&P 500 hitting record highs and as credit spreads close in on their pre-pandemic levels despite the unprecedented shocks.

2021 should bring stabilization and a reset for a number of disruptions experienced this year, with front-loaded market momentum and an economic recovery to follow. J.P. Morgan Global Research forecasts volatile but strong global growth as economies reopen. Heading into the New Year, J.P. Morgan Global Research analysts believe recovery, reflation and rotation against the backdrop of accommodative monetary and fiscal support will set the backdrop for key market and economic calls for 2021. “Global growth will be below trend in early 2021, but the strongest global recovery in a decade will play out by the end of 2021 if the vaccine prospects play out as expected,” said Joyce Chang, Chair of Global Research.

Group 7 Created with Sketch. 2021 5.8% 5.5% 4.8% Global U.S. Euro area 9.2% China 7.3% EM GDP growth in (% over a year ago) (% over a year ago)

Source: J.P. Morgan forecasts

Global Growth

Global GDP growth is expected to slow below trend, reaching 5.8%

J.P. Morgan Chief Economist Bruce Kasman forecasts global GDP growth reaching 5.8% and notes that optimism about 2021 global growth is building on the back of news that vaccines are now being rolled out to permanently sever the link between the COVID-19 virus and mobility. Widespread distribution of the vaccines should be forthcoming by Q321, however, Kasman cautions that “the legacy is an incomplete recovery with a 2.0% output gap that is larger than any similar recovery stage at any cycle over the past 50 years.” Policymakers remain committed to limiting spillovers, and there will not be a move away from accommodative monetary policy in 2021. Next year’s expansion of central banks’ balance sheets is expected to be half the size seen in 2020 and as a result, global fiscal policy should turn to a modest 1.5% drag after the 4.7% record fiscal thrust provided in 2020. Michael Feroli, Chief U.S. Economist, sees the U.S. economy growing at a 2.3% pace in Q1 but expects growth to lift on the recently approved $900 billion COVID-19 relief package, with additional fiscal stimulus potentially forthcoming in 2021, although the Federal Reserve will be mostly out of the picture. “The Fed will likely be on the sidelines for at least the next two years, while lingering labor market slack should keep inflation stuck in its 2010s range between 1.5% and 2.0%,” said Feroli.

Group 10 Created with Sketch. The Fed will likely be on the sidelines for at least the next two years, while lingering labor market slack should keep inflation stuck in its 2010s range between 1.5% and 2.0% Michael Feroli Chief U.S. Economist J.P. Morgan

Equities

S&P 500 companies hold record balance sheet cash and offer high earnings yields vs bond yields

Group 9 Created with Sketch. Cash as % of Total Assets S&P 500 (e x F inancials) 1 6% 1 4% 12% 10% 8% 6% 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 4% S&P 500 1 2 .2% 1 5 . 6 %

Source: J.P. Morgan U.S. Equity Strategy & Global Quantitative Research, Factset

S&P 500 2021 price target: 4,400

Group 10 Created with Sketch. Our base case is an S&P 500 price target of 4,400 and our EPS estimate is $178 in 2021 and rises to $200 in 2022. The Equity price-to-earnings multiple is expensive in absolute terms but not when low rates and reasonable growth prospects are taken into account. The largest beneficiaries will be stocks at the epicenter of the pandemic, such as Consumer Discretionary, Financials and Energy Dubravko Lakos-Bujas Chief U.S. Equity Strategist J.P. Morgan

The financial market recovery is well advanced compared to the economic recovery, but John Normand, Head of Cross-Asset Fundamental Strategy, points out that some segments of equities and fixed income, commodities and currencies still remain as much as 10%, or as much as 200 basis points, cheap to pre-pandemic levels. “Stocks will outperform bonds but our total return forecasts are below average for almost every fixed income sector due to low entry yields and spreads,” noted Normand. J.P. Morgan strategists are forecasting above-average returns on equities (10-20% across regions) compared to small losses for fixed income (-2% on Developed Market bonds) or below-average gains (1% to 4% on parts of credit). For the S&P 500, equity risk premium, defined as the spread between the forward earnings yield (reciprocal of P/E) and bond yield, is currently at ~3.3%, while non-U.S. Developing Equity Markets appear even cheaper on this metric at a 5.4% spread. The S&P 500 finished 2020 as the top-performing asset class, returning 16%, but Dubravko Lakos-Bujas, Chief U.S. Equity Strategist, sees the rally continuing, supported by the economic recovery, earnings, inflows and lower volatility. “Our base case is an S&P 500 price target of 4,400 and our EPS estimate is $178 in 2021 and rises to $200 in 2022. The Equity price-to-earnings multiple is expensive in absolute terms but not when low rates and reasonable growth prospects are taken into account. The largest beneficiaries will be stocks at the epicenter of the pandemic, such as Consumer Discretionary, Financials and Energy.”

The technical backdrop also remains supportive, characterized by an abundance of cash and declining volatility. Marko Kolanovic, Global Head of Macro Quantitative and Derivatives Strategy, expects $1 trillion of equity inflows/demand driven by systematic flows, hedge funding positioning, retail buying and share buybacks. He also sees a structural decline in the Volatility Index (VIX) to the high teens compared to the 2020 average of 28. Globally, he believes the positive drivers for equity markets are in place. Mislav Matejka, Head of Global and European Equity Strategy, now recommends holding positions in Eurozone, Emerging Markets and Japan equities. “A potential rebound in relative earnings of Eurozone could be on the cards, and the region could benefit from the style switch into Value,” said Matejka, “and Japan appears well-positioned as a traditional global cycle play.”

Fixed Income, Currencies and Commodities

Brent crude should finish 2021 at $68 per barrel

In fixed income markets, Matthew Jozoff, Co-Head of Fixed Income Research, favors spread product heading into 2021 as fundamentals and technicals are supportive. J.P. Morgan’s 2021 Year Ahead U.S. fixed income investor survey shows that ESG, high yield and high grade credit and EM are seen as the top asset classes to increase risk. Jozoff believes fixed income net issuance will remain at record levels and approach $4 trillion led by U.S. Treasuries, but the share of spread product will fall from 50% to just 30% or to $1.2 trillion compared to $1.9 trillion in 2020.

Duration supply excluding Fed purchases is set to more than double in 2021 to exceed $2 trillion. Jay Barry, Head of USD Government Bond Strategy, expects 10-year U.S. Treasury yields to rise to 1.25% by Q221 and to end the year at 1.45%. Steve Dulake, Global Head of Credit Research, sees spreads possibly overshooting near term but ending 2021 flatter or slightly tighter across the board although current spreads (125 basis points for U.S. high grade corporates) have already tightened past January 2020 levels. Even without further spread tightening, corporate carry plus roll-down on the spread curve should generate about 50 basis points per quarter. Record cash accumulation by high grade companies in Q220-Q320 could end up being used for M&A, share buybacks and dividends instead of deleveraging. U.S. dollar downside is likely to be limited as the great interest rate convergence of 2020 that accompanied much of this past year’s dollar weakness is now complete. EUR/USD should end-2021 near 1.18, where it has been trading in recent months.

“Fundamental balance of payments positions matter more, and surplus currencies should trend strengthen,” according to Paul Meggyesi, Head of Global FX Strategy. A wildcard risk for 2H21 is of an even stronger rebound in growth and inflation that could lift the U.S. dollar on the fears of an early policy exit. Natasha Kaneva, Commodities Strategy, sees global oil demand only reaching its pre-pandemic run-rate by mid-2022, with OPEC+ likely to stick to the terms of the existing agreement for the entirety of 2021, keeping a 1.3 million barrels per day deficit. OECD inventories won’t normalize until late 2021, boosting Brent prices to $68 per barrel.

Group 10 Created with Sketch. Fundamental balance of payments positions matter more, and surplus currencies should trend strengthen Paul Meggyesi Head of Global FX Strategy J.P. Morgan

Emerging Markets

Emerging markets (EM) growth is poised to rebound to 7.3% from 2.1%, led by China’s 9.2% growth providing an anchor, despite the lasting damage from COVID-19. But only a handful of North Asian economies are expected to recover to J.P. Morgan’s pre-pandemic projections while EM high yield economies should end 2021 at an average 5.0% in GDP shortfall relative to pre-pandemic projections. There are even larger shortfalls in parts of Latin America and Southern Asia. However, according to Luis Oganes, Head of Currencies, Emerging Markets and Commodities, “EM valuations remain attractive and EM assets are under-owned compared to global asset classes. 2021 returns for EM fixed income across EM FX local bonds, sovereign and corporate credit, should be in the 4-5% range, while EM equities could gain as much as 20% over developed market equities.”

Turning to alternative asset classes, Bitcoin has gained a following with millennials who see it as an “alternative” currency competing with gold, while corporate support has been growing via Square, MicroStrategy and Paypal. Nikolaos Panigirtzoglou, Senior Global Markets Strategist, believes that the adoption of Bitcoin by institutional investors has only begun compared to holdings of gold and sees Bitcoin’s intrinsic value rising significantly over the coming months as mining activity improves although near-term risks are skewed to the downside.

Group 10 Created with Sketch. EM valuations remain attractive and EM assets are under-owned compared to global asset classes. 2021 returns for EM fixed income across EM FX local bonds, sovereign and corporate credit, should be in the 5-6% range, while EM equities could gain as much as 20% over developed market equities Luis Oganes Head of Currencies, Emerging Markets and Commodities J.P. Morgan
Learn More
Back to top button Back to top

This material is not a product of the Research Departments of J.P. Morgan and is not a research report. Unless otherwise specifically stated, any views or opinions expressed herein are solely those of the authors listed, and may differ from the views and opinions expressed by J.P. Morgan’s Research Departments or other departments or divisions of J.P. Morgan and its affiliates.

RESTRICTED DISTRIBUTION: Distribution of these materials is permitted to investment banking clients of J.P. Morgan.

Distribution of these materials to others is not permitted unless specifically approved by J.P. Morgan. These materials are for your personal use only. Any distribution, copy, reprints and/or forward to others is strictly prohibited. Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. Information herein constitutes our judgment as of the date of this material and is subject to change without notice. Actual events or conditions are unlikely to be consistent with, and may differ materially from, those assumed. Accordingly, actual results will vary and the variations may be material.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. In no event shall J.P. Morgan be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction. J.P. Morgan makes no representations as to the legal, tax or accounting consequences of a transaction. The recipient should consult their own legal, regulatory, investment, tax, accounting and other professional advisers as deemed necessary in connection with any purchase of a financial product. This material is for the general information of our clients and is a “solicitation” only as that term is used within CFTC Rule 1.71 and 23.605 promulgated under the U.S. Commodity Exchange Act. Questions regarding swap transactions or swap trading strategies should be directed to one of the Associated Persons of J.P. Morgan’s Swap Dealers.

JPMorgan Chase and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging, financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities LLC, J.P. Morgan Limited, J.P. Morgan Securities plc and the appropriately licensed subsidiaries of JPMorgan Chase & Co. in EMEA and Asia-Pacific. Lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank, N.A. J.P. Morgan deal team members may be employees of any of the foregoing entities.

© 2021 JPMorgan Chase & Co. All rights reserved.