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The pandemic continues to present an array of challenges but, as we stand on the precipice of a New Year, shoots of optimism are beginning to emerge, with rising hopes of recovery in 2021. The International Monetary Fund’s (IMF’s) final 2020 assessment of global economic prospects was entitled ‘A Long and Difficult Ascent’. This provides an apt description of the current situation, with predictions pointing to a moderate rebound in 2021, and a continuing gradual recovery over the following few years.

While the IMF forecast does highlight continuing risks and uncertainties, which largely centre on the future path of the pandemic, there are reasons for optimism. Vaccine roll outs, in addition to the decisive US election result and the economic stimuli promised by US President-elect Joe Biden, for instance, should have a positive impact on market sentiment during 2021. These factors have certainly provided a much-needed confidence boost to global stock markets in the last month or so. At the end of November, the FTSE 100 index recorded its best monthly performance since 1989, fuelled by growing optimism that a successful vaccine can activate a faster than expected economic recovery from the pandemic-induced recession, and the Dow Jones posted its best monthly gain since 1987.

Global outlook winter 2020


As has been the case for all global economies, the pandemic has had a major impact on the European economy, but according to the IMF, ‘exceptionally strong policy response’ has banished a more devastating impact. The IMF predicts real GDP to contract by 7% in 2020, its biggest decline since World War II, followed by a rebound of 4.7% in 2021. As with every region globally, the recovery’s strength will depend on the course of the pandemic and the degree of economic policy support. To sustain recovery, the IMF indicates policies should try to address long-lasting challenges, such as low productivity growth and transition to a low-carbon economy. In an effort to protect the eurozone’s economy from further damage, the European Central Bank (ECB) recently increased its stimulus programme by €500bn, in view of ‘the economic fallout from the resurgence of the pandemic.’ The move will expand its ‘flagship pandemic-crisis-fighting tool’ to €1,850bn, as the ECB tries to stimulate growth and inflation. The ‘vaccine rally’ drove double digit gains for European equities.

The Brexit saga continues, with the 31 December deadline for striking a trade deal looming (see ‘UK’ section for further details).


In Q3, the Swiss economy recovered strongly from the previous quarter’s downturn, as restrictions eased. Manufacturing and services PMIs rose during the quarter, as did retail sales. In September, the KOF Economic Barometer reached a ten year high on positive signs from the hospitality sector and manufacturing. However, in Q4, external demand is likely to suffer amid restrictive measures, with the second wave impacting domestic demand and consumer confidence. Tensions increased with the EU due to disagreements over the renegotiation of the trading relationship. Following a likely contraction in 2020, the economy is set to expand moderately in 2021 as external demand recovers.


November was the best month for the UK equity market in over 30 years, with vaccine breakthroughs and optimism over Joe Biden’s victory, boosting investor sentiment. The economy grew by 15.5% in Q3, according to the ONS, the largest rise recorded by the UK in a single quarter. The most recent economic outlook from the Organisation for Economic Co-operation and Development (OECD), predicts that the UK economy will contract by 11.2% in 2020, followed by growth of 4.2% in 2021, as consumption rebounds. The report says that for the first time since the pandemic began there is now hope for the future, ‘Progress with vaccines and treatment have lifted expectations and uncertainty has receded.’

The OECD highlights the importance of the UK agreeing a trade deal with the EU by the end of the year, to limit disturbances to importing and exporting industries. Failure to do so would, ‘entail serious additional economic disturbances in the short term and have a strongly negative effect on trade, productivity and jobs in the longer term.’ Brexit talks restarted after Prime Minister Boris Johnson and European Commission President Ursula von der Leyen agreed to an extension of their original 13 December deadline. A joint statement outlined, ‘Our negotiating teams have been working day and night over recent days and despite the exhaustion after almost a year of negotiations, despite the fact that deadlines have been missed over and over, we think it is responsible at this point to go the extra mile. We have accordingly mandated our negotiators to continue the talks and to see whether an agreement can even at this late stage be reached.’ Major sticking points include fishing rights, regulations governing fair competition between businesses and how any deal agreed will be policed in the event of disputes.


In the US, Joe Biden’s defeat of President Trump powered a market rally, as hopes elevated for an additional injection of fiscal support for the economy. US stocks recently reached highs, following a weak jobs report, which pressurised US policymakers to agree a new stimulus package. The President-elect urged Congress to agree a path forward. Moving away from the $2.4trn pandemic relief package they had been advocating before the election, House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer, indicated they “could come to an agreement” based on a multibillion dollar plan devised by a bipartisan group of lawmakers. The OECD expect real GDP to contract by 3.7% in 2020, before rising by 3.2% in 2021. Federal Reserve Chair Jerome Powell said that while vaccine development is positive for the economy in the medium term, “significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups.”

Asia and Emerging Market Equities

Asian and global emerging market equity performance was positive amidst vaccine news and certainty around the US election. Significant regional divergences in economic and market resilience still exist. Equity markets in Latin America and EMEA (Europe, Middle East and Africa) are under pressure, as an increase in virus cases and the re-imposition of restrictions in certain regions, stoke concerns of double-dip recessions.

In China, monetary stimulus, employed during the outbreak, is being withdrawn as the recovery gains momentum. The OECD predict that, following the steepest quarterly dive in Q1, subsequent surge in Q2, and stabilisation in Q3 2020, activity will return to its past trajectory, with growth of 8% in 2021. The Japanese economy is gradually strengthening. In November, the Nikkei 225 had its best monthly performance since January 1994. The recovery of major trading partners is set to support exports, while the Tokyo Olympic Games will boost consumption and exports temporarily.


Oil prices traded higher recently, after the Organization of Petroleum Exporting Countries and allies (OPEC+) agreed to increase their collective output by 500,000 barrels a day from January, indicating their belief that the worst of the shock to demand inflicted by the pandemic has passed. Optimism surrounding a surprise decline in US crude supplies and vaccine developments, all combined to support the price, and provide hope of a swift recovery in global oil demand in 2021. Brent crude is currently trading at around $50 per barrel. Gold is currently trading at around $1,848 a troy ounce. The price rose following the unveiling of a possible new US spending package, awaiting guidance on monetary policy from the Federal Reserve.

Looking ahead

A general rollout of an effective vaccine in 2021 will allow an easing of containment measures and strengthen confidence. The course of the pandemic obviously poses risk, but the vaccine promises a return to near normal life in the not-too-distant future. The global economic recovery will strengthen and become more sure-footed by the middle of 2021, although the pace of recovery is indeterminable. In addition to uncertainties created by the pandemic; Brexit, trade and political issues will no doubt persist.

Whatever the future holds, the key to successful investing will inevitably remain embracing a long-term philosophy, based on sound financial planning principles and looking forwards, focusing on future key trends and longer-term investment themes. Given the heightened uncertainty, it has arguably never been more important to obtain professional financial advice. We can help you navigate the opportunities and challenges that emerge as the New Year unfolds.

Global outlook winter 2020

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