Economic Outlook Q2 2021

· The pandemic has been a difficult and uncertain experience, but the development of effective vaccines to combat the spread of infection marked the beginning of the end, creating a viable path toward the better days ahead.

· The fact that there is more clarity about the road ahead than at any point over the last year, however, does not necessarily ensure that it will be a smooth and fast return to pre-crisis life.

· Indeed, the rise in infection rates over the last month and the resultant return to lockdowns in some regions just serves to emphasis that the global economy is far from being free and clear.

· With that all said, it appears that the world is moving closer to the beginning of the new beginning. And when the all-clear is finally signaled, there are fundamental reasons to anticipate that the global economy will be set to shift into a significantly higher gear.

· Accordingly, consensus forecasts for the current year have seen steady increases since the first announcement of successful vaccine phase trials back in November, with growth expected to be significantly above pre-crisis trend rates across the world (though, some regional variation is expected given the different speeds with which economies can reopen in earnest).

· This improving economic outlook, and the abundance of fiscal and monetary stimulus, has resulted in the anticipation that price pressures will become more pronounced and raised concerns that inflation expectations could become unmoored, creating a negative inflationary environment. While there is potential for inflationary pressures to rise, concerns that inflation is going to run excessively hot soon appear to be misplaced, much like they were coming out of the recession in 2009.

· The current environment will remain challenging and plagued by some persistent uncertainty and headline risk, which speaks to maintaining a bias toward higher-quality investments in the core of investment portfolios.

· The outlook, however, is looking increasingly positive and which would be supportive of tilting portfolio risk exposures toward those asset classes that stand to benefit from a cyclical upswing.

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