Financial markets have gotten off to a benign start in 2021, despite civil and political unrest in the US. Prospects for a fairly prompt recovery from the coronavirus crisis look good, and markets have already priced in a fair amount of optimism. Equity markets have risen gradually and US Treasury yields have increased, rising well above 1% in the first days of the new year. “This is perfectly in line with what we expect for this year,” Marco Willner, head of investment strategy, says in our latest podcast. “We also expect further tightening of spreads in the credit space.” Willner’s views and those of NN IP’s multi-asset investing team are presented in “Back to a new future”, NN IP’s outlook for 2021, which defines three possible scenarios for the coming year.

“What we are seeing on the interest rate side at the moment, especially in the US, where higher yields are driven by higher inflation expectations, actually fits quite well in our base case and also our more optimistic scenario,” notes Ewout van Schaick, head of Multi Asset. He expects another good year for equity markets, but with different underlying dynamics. Sectors hit hardest by the pandemic should make a comeback, thanks to central bank policies and fiscal stimulus. Corporate bonds are poised to outperform government bonds, and commodities offer opportunities, particularly in the more cyclical segments.