Supply shortages are fueling inflation fears, but with global trade thriving, we think supply shortages are mostly driven by the consumption binge of U.S. consumers.
Two concerns are top of mind for investors: inflation overheating and peak economic growth.
As the global economy emerges from the pandemic, central banks are starting to reduce emergency stimulus.
Canadian growth expectations, like the U.S., are outperforming this year, which is benefiting earnings expectations.
Fears of deflation have since morphed into fears of overheating after unprecedented increases in monetary and fiscal stimulus in a short amount of time and growing supply shortages.
The vaccine rollout is accelerating, and further U.S. fiscal stimulus remains on track to be delivered soon, which is helping lift growth expectations.
Economic and earnings momentum continues to improve faster than expected in North America and Asia.
As we turned the page on 2020, COVID-19 vaccines began to be rolled out while fiscal taps are flooding the economy with cash, notably in Canada and the U.S.
After a challenging 2020, we are optimistic 2021 will be much better although it may take a few months to get the pieces in place for a pronounced recovery.
Vaccine developments have opened the door to market rotation toward cyclicals and value.
Removal of U.S. political uncertainty and positive news on a COVID-19 vaccine should ensure a robust economic and earnings recovery in 2021 even though mobility is likely to be restrained this winter.
Election night clarity was probably too much to hope for.
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