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Bull or Bear in 2021?

Though the COVID-19 pandemic continues to disrupt social and economic life around the world, it has yet to take the wind out of equity markets' sails. And with developed countries' monetary and fiscal policies remaining generous, and vaccines on the way, there is good reason to suspect the bulls to keep charging in the new year.

LONDON – In two of my previous commentaries on the peculiar world of equity markets in 2020, I offered a bullish outlook for how events would unfold as the year progressed (with all due caveats for the market’s overall unpredictability). In the event, things have broadly played out as I anticipated, owing to a remarkable monetary- and fiscal-policy expansion and the timely arrival of vaccines that appear capable of ending this dreadful pandemic.

What can we expect in 2021? I will consider both the bullish case and the bearish one before I reveal my bias. On the positive side, the year will follow a similar script as 2020, with generous monetary and fiscal policies justifying further optimism for equities.

After all, bull markets do not die of old age. They typically end because, beyond the issue of valuation or the duration of the market’s climb, some new factor or force intervenes. Moreover, recent comments from policymakers seem to suggest that even more generosity is on the way, particularly in the United States. There is also a good chance that President-elect Joe Biden, once in office, will call for a special meeting of the G20 to demonstrate that “America is back.”

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