Page 23 - Investment Advisor - Jan/Feb 2021

Schwab’s Sonders, Kleintop Predict 5.2% GDP growth in Europe versus 3.1%
for the U.S.
Weak Start for Economy in 2021 downs in the first half of 2021 in cer-
There probably will be more lock-

he U.S. economy likely will con- duration of unemployment and the per- tain countries, but the situation should
Ttinue to suffer from pandemic- centage of people who have been unem- improve after the vaccines become more
related issues in early 2021, but growth ployed more than 27 weeks, Sonders said. widely available and the weather gets
is expected in the second half of the year Such “scarring tends to suggest that it warmer in spring, he predicted.
thanks in part to COVID-19 vaccines. becomes increasingly more difficult for There are still risks beyond COVID,
“Unfortunately, in the near term, we those folks to find jobs,” she told report- he said — there are the typical risks that
are seeing weakening activity by virtue of ers. There is probably less of a “stigma” accompany any new year, and also eco-
the virus, even” in U.S. locations “where to being out of work for so long this time nomic and geopolitical risks.
we haven’t had any kind of mandated because everybody chalks it up to the “There are a lot of things we’re going
lockdowns,” Liz Ann Sonders, senior vice pandemic, she noted. to have to keep our eyes on,” including
president and chief investment strategist “But there’s also a higher likelihood elections and “the aftermath of the bail-
at the firm, said in mid-December during that those folks dropped out of the labor outs and the stimulus as that begins to
a Schwab 2021 Market Outlook call. force altogether. And tied to that would fade,” he warned.
The firm’s general consensus forecast be permanent job losses,” she said. Sonders said at the time that the run-
is that we will see “near-term weakness While we have “seen a huge decline in offs in Georgia “could be a negative
over the next quarter or two tied to the temporary layoffs,” Sonders said, “that’s market event.”
virus and then a pickup in growth there- because most of the payroll gains have However, “we don’t think it means an
after,” she said. been people getting their old jobs back.” ushering in of some of the more extreme
While there is “a lot of discussion about policies that were part of” Joe Biden’s
pent-up demand” among U.S. consum- GLOBAL PERSPECTIVE presidential campaign platform, includ-
ers that stands to help the economy, “the As 2020 closed, “global economic momen- ing “major tax increases,” she said.
pent-up demand may have been met for tum is fading,” according to Jeffrey “The ability to get that done will still
the most part once the lockdowns ended Kleintop, senior vice president and chief be tempered by not just the tie in the
on the good side of the economy,” she said. global investment strategist at Schwab. Senate, but some fairly moderate voices
However, “given the still-beleaguered However, “the good news is the on the Democrats’ side,” Sonders added.
state of services and the lack of desire economy globally has the potential to
to utilize a lot of services — certainly in make a full recovery next year, rebound- INVESTING TIPS FOR 2021
the travel, leisure and hospitality area — ing from” the International Monetary Sonders suggested taking a “hybrid
that’s probably where we’ll see the bigger Fund’s projected 4.4% GDP decline for approach” to investing. This means hav-
improvement from a pent-up demand 2020, with growth of 5.2% expected for ing a “combination of growth charac-
perspective once we’re back in a more 2021, he noted. teristics and value fundamentals when
normal economic environment,” she said. If the IMF’s projection comes true looking for stocks, [having] that qual-
for 2021, that would bring us to “about ity overlay, and don’t necessarily feel
LONGER-TERM PANDEMIC RISKS 6/10 of a percent above where we ended like you have to make a sector-based
There is potentially “positive and nega- 2019 — so a full recovery,” Kleintop said. decision or a style-based decision,” she
tive longer-term impact” related to the “A combination of easy monetary poli- noted. “Combining factors into that
pandemic, even after it ends, according cy and fiscal policy combined with a suc- analysis will be the winning strategy.”
to Sonders. cessful vaccine rollout beginning in the Kleintop’s main investment sugges-
“We have to keep a close eye on not first half should lead to a pretty strong rise tion was simple: “Avoid doing nothing.
just” broad labor market data, but “spe- in economic and earnings growth — espe- Most investors have let their portfolios
cifically some of the measurements that cially in Europe,” which is quite different drift towards U.S. equities” and it is time
suggest” we may be seeing a potential from what we’ve seen in any outlook over to rebalance now, he said.
“scarring effect” like what is tradition- the past decade or so, he pointed out.
ally seen after a major recession or other “2021 may see the U.S. pass the baton Bernice Napach can be reached at bnapach@
economic crisis, she said. of global growth leadership to Europe,” alm.com. Jeff Berman can be reached at
Data to keep an eye on includes the he said, pointing to IMF’s projection for [email protected].

JANUARY/FEBRUARY 2021 INVESTMENT ADVISOR 21