Grounds for Economic Optimism

Although the strength and speed of the global recovery over the first half of 2021 exceeded most expectations, the economic outlook inevitably remains uncertain. However, while future growth prospects are likely to stay closely linked to the future path of the Covid.

Stronger recovery predicted

Over the summer months, forecasting agencies took turns to upgrade their growth projections for developed nations as a succession of economic data proved stronger than analysts had predicted. In its latest assessment, for example, the International Monetary Fund (IMF) increased its combined 2021 growth forecast for advanced economies by half a percentage point, primarily due to the success of vaccine rollouts and government stimulus measures supporting recovery.

Risks and uncertainties

The IMF assessment, did highlight a divergence in fortunes between rich and poor nations due to differing levels of access to vaccines. As a result, an offsetting downgrade across emerging markets and developing economies meant 2021’s global growth forecast actually remained unchanged.

Ongoing concerns surrounding inflation also persist, despite policymakers’ insistence that the recent upward trend in prices will prove transient. Furthermore, the current mammoth levels of spending by governments and central banks can only be a temporary phenomenon and, when stopped, will impact on growth.

Grounds for optimism

While the outlook is therefore expected to remain relatively uncertain, there are grounds for investor optimism. Market fundamentals, for instance, remain comparatively strong, with earnings growth still being fuelled by pent-up demand as economies reopen, and companies starting to invest again as the recovery has gathered momentum.

Diversification remains key

There is no question that the world is in a period of immense change, with issues relating to the pandemic, as well as sustainability, fundamentally altering the investment landscape. Some things however do not change, like the importance of holding a diversified investment portfolio and the need for expert financial advice. That’s where we come in.

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The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

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