Page 2 - ISQ January 2021

INVESTMENT STRATEGY QUARTERLY

Letter from the Chief Investment Officer

The Ten Themes for 2021—Seeking the Thrill of Victory

We wish you a safe, healthy, and prosperous New Year! These words are even more meaningful given the most
deadly and economically crippling ‘Black Swan’ event that we have experienced in the last century—COVID-19.
After unprecedented fiscal and monetary stimulus, the record-setting development of multiple effective vaccines
has elevated optimism that we will experience the ‘thrill of victory’ over this nemesis in the upcoming year. The
first-ever postponement of the Summer Olympics, scheduled to take place last July in Tokyo, Japan, exemplifies
the depths of disruption this pandemic has caused. However, the concept of the torch is associated with hope,
light, and strength, an excellent metaphor for the rescheduled start date— 23 July 2021 —likely coinciding with
the sustainable reopening of many parts of the world. In fact, in the US, optimistically, more than 50% of the
population (the majority of which are among the most vulnerable) could be inoculated from the virus by the
opening ceremonies. After more than a year of social distancing, the athletic events are the quintessential celebra-
tion for the world coming together once again. As a salute to everyone that has done their part to make this
happen—from scientists to frontline workers to the athletes themselves—and to set our sights on a more uplifting
time period, we have chosen the Summer Games as the backdrop for our Ten Themes for 2021.

#1: Global Synchronised Economic Recovery #2: US Economic Recovery Taking On A Tri-

– Rowing In The Same Direction
athlon
Nineteen of the twenty largest economies in the world experienced While our overall expectation is that the US economy will return to
a contraction in growth in 2020, but we expect the entire ‘crew’ to healthy, positive economic growth on an annual basis (2021 US GDP
rebound and see positive growth in 2021. The ‘coxswain’ of the forecast: ~4%), the recovery will be defined by transitional periods
recovery will continue to be global central banks, led by the U.S. with varying paces throughout the year. At the onset, worsening
Federal Reserve (Fed), as its decisions to keep interest rates low and COVID trends and paused reopening processes will prove to be a
liquidity robust will ultimately dictate the power and pace of the challenge. Analogous to swimming, the first leg of the triathlon, the
global economic recovery. With short-term interest rates at or below pace will be slower than that of the biking and running legs, and the
zero for the foreseeable future and global central banks having the waters may be choppy. However, by the spring, economic growth will
stamina to allow inflation to overshoot temporarily, economies should accelerate as the dissemination of vaccines ‘push the pedal’ for more
have a favorable glide path to recovery. Given that monetary and businesses to safely reopen. Pent-up demand, especially for services,
fiscal stimulus actions have a lagging economic impact, we expect a rebuild of depleted inventories, an improving labor market and a
all these economic oarsmen to experience a ‘swing,’ or synchronised resurgent global economy should help the economy notch its ‘top
forward motion, by midyear. speed’ through the summer and early fall. However, toward the end
of the year, we expect the US economy to reach a steadier ‘stride,’
finishing at a slower, but more sustainable pace.

Investment Strategy Quarterly is intended to communicate current economic and capital market information along with the informed perspectives of our investment professionals.
You may contact your financial advisor to discuss the content of this publication in the context of your own unique circumstances. Published 13/1/2021. Material prepared by
Raymond James as a resource for its financial advisors.

2