2021 Macroeconomic and Investment Outlook: A Glimmer of Hope

2021 Macroeconomic and Investment Outlook: A Glimmer of Hope

Dear Client/Reader, 

Kindly find attached our 2021 Macroeconomic and Investment Outlook “A Glimmer of Hope” to guide your investment decisions in 2021.

Below is our executive summary.

World powers and economies suffered deep recessions and economic rebounds within the space of months as financial markets plunged sharply in 2020 as a result of the pandemic. However, research breakthroughs on a medical solution to the Covid19 virus has been approved, and this holds the promise of a growth rebound in 2021. We expect a vaccine rollout in Q1’21, with the hope that normalcy can return to many countries. In addition, a more cordial and diplomatic relationship between the US and the rest of the world could positively influence global macroeconomic risks to the upside, enabling many countries to get back on the path of growth.

The World Bank projects that the global economy will expand by 4% in 2021, with the immediate policy priorities focused on controlling the spread of coronavirus and ensuring rapid and widespread vaccine deployment as well as strategic investments.

The Nigerian economy is projected to grow by 1.1% this year according to the World Bank. In 2021, we expect GDP growth to be buoyed by increased economic activity and some improvements in the oil market. Also sentiment for stocks depends on the direction of monetary policy, particularly in relation to the yield environment. A sharp reversal of rates is likely to trigger a sell-off in the equities market,

Accordingly, our projection for the Nigerian stock market in 2021 is that domestic interest, fueled by dividend expectations, is likely to sustain the market rally in Q1-2021. However, in the absence of foreign demand, we see a short-term bear market from Q2 to Q3-2021.

With over N5.1 trillion expected to mature in 2021 liquidity in the system will increase further. We expect that yields on CBN Bills alongside other rates will remain low in the early part of the year. However, we believe regulators will make efforts to increase rates in order to attract foreign capital into the economy. This will materialize in H2 2021. As the economy recovers; the market will experience improved activities in the year.

We envisage a year of significant positive return in the equity market and improved yields in the fixed income market. Our model portfolio projects such opportunities. 

Please click here to view our model portfolio for 2021.

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