Investors and analysts are optimistic about the prospects for the markets in 2021. Foundations managers are almost unanimous: we are waiting for the restoration of economic activity, which will support assets that have already increased much in price from the crisis March floor, but also will provide growth in the sectors remaining on the side of the road rally. The profitability of bonds is expected to remain low, thereby providing additional support for the quotations of shares.
Financial Times asked investors that could go wrong.
Howard Marx, Co-Chair Oaktree Capital Management:
The main danger is the increase in interest rates. A high assessment of assets depends entirely from low rates. If they grow up, the price of assets may fall. However, there is no significant reason to expect rates growth in the short term, since special inflation is not noticeable and, it seems to me, it does not bother the Federal Reserve US system.
Sam Finkelstein, co-director for investment in global GOLDMAN Sachs Asset Management Bond Markets:
Investors in the bond market may encounter two risks in 2021. First, large-scale stimulation measures in response to the pandemic extended the period of low returns and related risks. Secondly, the central banks remained a limited set of tools in the case of a recession. It makes us apply even more effort to create balanced portfolios, which will be able to survive the explosions of market volatility.
Vensen Marita, Deputy Investment Director Amundi:
The market rally of recent months is based on the blind faith in the vaccine and on the string assumption that everything will be very soon as well as before, and even better. This is the risk: the production and distribution of vaccines on such a scale is not a walk through the park.
Fiscal and monetary stimulation helps economies to keep afloat - but only to the time before time. Implement these measures in practice is becoming more complicated. It is worth expecting even greater monetization of debt and pressure growth on central banks; Now it is impossible to think about the collapse of anti-crisis measures, and the markets underestimate the risk of error in the policy pursued.
The third risk is the consensus itself in the market. The share of the bond market with negative yield is growing, so the pursuit of yield can take extreme forms: bonds are almost $ 1.5 trillion - these are zombie companies. Temptation to agree to the inclusion of lower quality bonds in the portfolio is great, as is the calculation on the fact that interest rates will always remain low. In this, the danger lies.
Liz Ann Saunders, Chief Strategist for Investment Charles Schwab:
Most of all the moods in the market are now worried. The market successes of recent time spent the greatest, from my point of view, risk - overly optimistic expectations. By themselves, they do not foreshadow the inevitable correction, but mean that the market may turn out to be more vulnerable to negative factors, in whatever form they arose.
Scott Mainend, Director of Global Investment Guggenheim Partners:
A pandemic completely transformed our market economic system based on competition, risk management and prudent budget policy. It is replaced by increasingly radical interventions on a monetary front, socialization of credit risk and the nationwide policy of promoting irresponsibility.
It causes anxiety, and under the surface there is a worsening debt situation, judging by defaults, changes in ratings, corporate performance indicators. In general, on the market of high-yield bonds, debts companies now exceed their profits before taxes and other deductions over the past 12 months by 4.5 times. This indicator is higher than at the peak of the default cycle in 2008-2009, and, most likely, the situation will deteriorate.
Gregory Peters, Managing Director PGIM Fixed Income:
Inflation remains the largest market risk. I think it will temporarily accelerate in 2021 due to the effect of the low base last year, and then slow down again. But the risk is that it can continue acceleration, and it changes everything. We believe that the Fed will take a firm position and will not respond to inflation. But if the Fed surrender nerves, and it will begin to worry about inflation earlier than gave to understand market participants, it can be a problem for them and provoke such a development of the situation, as in 2013, when the markets fell after the announcement of the Fed on the collapse of the monetary stimulation program .
Danny Jon, Founder of Dymon Asia Headge Foundation:
The dollar has slipped down last year, but at some point it can fall sharply. If this happens, the Fed will lose the flexibility that negative real interest rates give, and even may be forced to pause in the assets' buying. If you lose such support, the world may experience hard shock. This is likely that this is not a crazy script. If the dollar is much falling, the Fed can lose opportunities to mitigate the monetary policy, which will offer for sale in the stock market.
Paul McNamar, managing bond portfolios in the developing GAM markets:
Growth in financial markets is provided with low key betting and bond returns, reduced discount rates support assets prices and reduce the cost of servicing public debts.
Although most developing countries have a debt burden significantly lower than those developed, this cannot be said about the return, so the cost of serving the debt for them has not decreased to the same extent. Central Banks in developing countries reduced interest rates as aggressively as in developed, but bond buyers were more careful. The central banks of developing countries do not have the same credit credit as developed.
The example of Turkey is especially instructed: the government's refusal to recognize the payment balance problems led to the need for a significant increase in rates, which became almost a unique phenomenon. And this is an example of what we consider as a broader risk: if developing countries will not be aware that in their case the restrictions related to the balance of payments are much more stringent than in developed countries, their debt situation can deteriorate significantly that it remains very Distant probability for developed countries.
Translated Mikhail Overchenko