The world is going to reverse directions by becoming less global and more local in the next few years, according to Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.
Forces driving the change for commerce and the markets include the pandemic and consumers’ desire to act more sustainably, she said.
“The pandemic showed us the fragility of global supply chains," Marcelli said today during a UBS conference call that centered on “The Year Ahead.”
"For instance, the personal protective equipment that is needed in the U.S. is manufactured mostly in China,” which created a major supply problem for health-care workers here, she noted.
Mark Haefele, chief investment officer of UBS Global Wealth Management, stated that a multi-polar world is developing, and not just a bipolar one dominated by the U.S. and China.
“The U.S. is going to bounce back strongly [from the pandemic and the economic downturn of the spring], but the U.S.’s place in the world is changing.”
Estimates for U.S. economic growth for 2021 range from 3.1% to 3.6%, but that could be increased by 100 basis points if there is a smooth rollout of a vaccine during the year, Haefele said.
Haefele said he is optimistic about the future for the U.S. and other countries because he believes businesses and economies will regain pre-pandemic levels by next year's third quarter. And he noted that people have high savings rates and will likely invest some of that money as the economic recovery gains steam.
“Clients held off investing before the election but now are beginning to put capital to work in equities,” Marcelli added.
Both Haefele and Marcelli said a Biden administration will bring more clarity to the U.S.’s relationships with other countries, including China, which will bring some stability to the market. At the same time, Marcelli said the dollar will be weaker next year. “To counter that, investors can diversify into other currencies.”
There also could be a shift toward mid-cap equities and away from large-cap and the mega-tech companies, Marcelli said.
“Investors should look to industries and companies that are innovating with the new technologies that are available,” she said. “The development of 5G is going to help a lot of sectors. Beneficiaries will include healthcare and telemedicine, which will transform medical treatments. This is going to be a decade of transformative technology.”
One of the big opportunities will be in sustainable companies in Europe and Asia where agreements have been signed to reduce carbon emissions, Haefele said. The sustainability trend and other consumer demands will be met by private companies which will make private equity a good investment.
Marcelli noted that private equity can be used as a portfolio diversifier, but investors need to make sure they're willing and able to tie up their money for the long-term lockups required by private equity.