Federated Hermes: 2021 Outlook
• As the Covid-19 vaccine distribution widens, the recovery should accelerate as pent-up demand is unleashed among consumers, by far the largest segment of the economy. Growth may struggle a few months before reaching this inflection point.
- A gradual return to normalcy over the course of next year should feed animal spirits and lift equity markets to new highs. We’ve set respective S&P 500 price targets of 4,500 and 5,000 for 2021 and 2022.
- The recent tilt toward value stocks, which tend to perform best early in a recovery, is taking hold. Small caps should continue to benefit for similar reasons in 2021, and international stocks offer the potential for relative outperformance.
- Because rates likely will remain low, we believe the best fixed income opportunities should come from credit—investment-grade and high-yield corporate bonds, and emerging-market securities.