Long-Term Outlook 2021

Long-Term Outlook 2021

Aegon Asset Management’s Long-Term Outlook considers the emerging trends, opportunities and challenges facing investors over the coming years. Published annually, it draws upon the expertise and insight of our 370 investment professionals across the world.

 

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"In a still-volatile environment, it is worth reiterating the basic mantra of any investor, which is to invest for the long term. This fundamental fact of our business is as true today as it ever has been. We hope that our Long Term-Outlook proves to be a useful guide in helping our clients make sense of current investment markets and capitalize on opportunities.

 

My colleagues and I look forward to helping our clients navigate the new investment landscape."

 

 

 

Our long-term expectations

We expect the world economy to continue to rebound from the hit of the Covid pandemic. Despite risks surrounding new variants of the coronavirus, we expect effective vaccines and the reluctance to reimpose new lockdowns will allow the economic recovery to continue. This should provide some support for risky assets from a macroeconomic perspective.

 

In the table below, we summarize our long-term views on key asset classes.

 

Long-term views on key asset classes

Government Bonds We expect interest rates to rise marginally compared to the current implied rates. This in general leads to low return expectations on sovereign bonds. Within sovereign markets, the UK gilt markets stands-out as its rates have more scope to rise. The Bank of England is likely to be able to raise rates faster compared to the European Central Bank.
Credit Credit asset classes are likely to experience a benign environment, where the rating drift is upwards and defaults low. This would result in a return which is close to the current starting yield. Spreads are however tight and are likely to move marginally wider as central bank support is reduced. We do think that lower rated credits are set to outperform, also as fallen angels can partly return to the investment grade universe.
Equities Returns on equities are likely to be below historical averages as current valuations are elevated. However, equities still offer potential for decent earnings growth due to the economic rebound and due to the large share of high margin and growing technology companies in the index. Potential increases in corporate tax rates are likely to be a small drag on net earnings.
Alternatives Several alternative fixed income asset classes currently offer a spread pick-up over sovereign bonds.
Real Estate Real estate markets have come to terms with changing trends in workingfrom-home and online shopping. Going forward, this is typically an asset class which stands to benefit from low funding costs.

 

Download our full report to get all the details and insights

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Important disclosures

Long-Term Outlook 2021 Aegon AM-ENG.pdf

(1.82MB) PDF

Aegon Asset Management


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