6 Economic Predictions for 2021: Northern Trust

U.S. equities, high-yield bonds, emerging markets and listed infrastructure should have a decent 2021 based on several factors outlined by Bob Browne, Northern Trust executive vice president and chief investment officer.

Also, he said, 10-year bonds will gravitate toward 50 basis points while the Federal Reserve will remain on hold and continue its use of quantitative easing. And U.S. growth should be around 4%, a welcome return after a negative 2020.

Northern Trust sees a V-shaped recovery into 2021, especially as businesses reopen and pent-up demand is released, but stocks probably won’t see the “surprisingly robust” returns of the 2020 stock market.

“For five years in a row we’ve had double-digit returns in U.S. stocks, [which] have returned 14% annually for five years,” he told ThinkAdvisor, noting that this year the return will be about 5%, “but going forward, the next five years should bring 25% in gains overall.”

Emerging markets had a rebound in 2020, returning 10% through Dec. 15, and should see a 7.9% return in 2021, largely due to exposure to China, which Browne said will probably have growth of 8% next year.

Having been bullish on high-yield bonds for some time, Browne said “The low-rate environment is going to be good for both high-yield and investment-grade bonds. Cash will be a drag on the portfolio return … We don’t expect the Fed to move in the next year or really anytime over the five-year horizon.”

Northern Trust also sees taking moderate investment risk with a tilt toward listed infrastructure companies, such as those in airports, pipelines and railroads.