November’s rally continued into December with global equities capping off one of the most volatile years in history on a high note. Vaccine optimism, another fiscal stimulus package in the U.S. and a post-Brexit trade deal boosted investors’ risk appetite. The year-end rally helped push most asset classes into positive territory for 2020, albeit with huge disparities between the top and bottom performers.

The efficacy of the vaccine rollout will be a key variable for economic growth and markets. Investors have so far looked past the early challenges, but prolonged delays could ultimately take some shine off the rally. Elsewhere, the results of the Georgia Senate run-off election create a scenario where additional stimulus and higher spending are likely, while more polarizing policy agenda items like meaningful tax increases face higher hurdles. Regardless, we maintain a high degree of confidence that global governments (and central banks) will remain committed to supporting the recovery.

The overall implications for investors in 2021 are becoming clearer. “Safe-haven” assets will struggle to generate positive real returns given current inflation expectations and low yields. Higher yielding credit markets have less upside after an incredible run into year-end but remain a relatively attractive source of income. Equity markets still have upside potential and we expect the sectors and styles that lagged in 2020 to catch up as vaccines become more widely available.