Building back better

In this year’s outlook, we share our views on the ongoing transition to a Circular, Lean, Inclusive and Clean (CLIC™) economy, ask what a post-pandemic world may look like, and consider the likely consequences of Biden’s presidency. 

We are expecting a new normal to develop in 2021 as countries begin to emerge from tougher lockdowns. We think the pandemic has highlighted a close link between air pollution and air-borne zoonotic viruses, as well as a link between the spread of viruses and the destruction of natural habitats. In our view, this could lead to a strong shift in focus to bring the broader topic of sustainability back onto corporate and investor agendas.

The shift in the utilities and energy sectors (towards lower-carbon emissions) is likely to accelerate on the back of new regulations and large infrastructure spending. This mega-trend will be accompanied by an acceleration of the digitalisation and automation of large swathes of the economy.

Concentration is the worst response to uncertainty, in our view. While performance of sovereign bonds has been very positive in 2020, the protection these assets offer is likely to prove weaker going forward than has been the case in previous market shocks. This means other sources of portfolio protection are required.

We expect 2021 to characterise a period where pent-up demand could be truly unleashed. This would end the services-led recession in Asia. Markets are already anticipating this and the current buoyant equity markets and easy debt funding markets should, in turn, spur firms with strong capitalisation to look towards investments once more.