Year-End 2020 Investment Commentary

The likelihood of widespread vaccine distribution supports the case for a cyclical economic recovery beginning in the second and third quarter of 2021. Central bank monetary policy is almost certain to remain very accommodative for at least the next year or two. And fiscal policy is unlikely to be restrictive and could be stimulative, depending on political outcomes. This macro backdrop should be supportive of equities and other financial risk assets, at least for the next year. Over our five-year tactical horizon, we continue to favor emerging-market stocks over U.S. stocks and flexible bond strategies over core bonds. There are always risks to our outlook: the virus and extreme investor optimism in the short term, inflation and China longer term. But overall, there are reasons for optimism for our society, economies, and markets in the year ahead.