Stephen Dover, our Chief Market Strategist and Head of Franklin Templeton Investment Institute, shares four investment themes he’s thinking about as the world recovers from the COVID-19 pandemic.

Within Franklin Templeton, we have investment teams around the world with independent investment processes. Yet, if you had asked any of us for our predictions a year ago, none of us would likely have predicted the COVID-19-induced equity market volatility in early 2020, nor that equity markets would quickly rebound and remain near all-time highs almost a year later.

So, the question now is: where do we go from here? Despite the recent strong global equity market performance, the pandemic is ongoing and most of the world is still waiting for vaccinations, putting a strain on the global health and economic systems.

Below, we highlight four things we are watching regarding equity markets and the global recovery from the pandemic.

1. The Return to Normal

Global equity valuations appear to reflect the presumption that many regions of the world will reopen this year and gross domestic product (GDP) growth will rebound from 2020 levels when consumption picks up. According to our analysis, there is considerable pent-up consumer demand and a tremendous amount of stimulus in the system.

However, we believe the global COVID-19 vaccine rollout will ultimately determine the pace and breadth of the global economic recovery. Although the rollout has been slower and less efficient than we hoped, we believe the magnitude and efficiency should pick up over the next few months.