The MSCI World Index of developed market (DM) equities rallied in November, as encouraging vaccine news spurred hopes of a prompt return to “normality”. Analysts at Capital Economics think that the positive equity market rotation that accompanied November’s vaccine announcements will resume before long if, as expected, vaccines allow restrictions on activity to be lifted later this year.
Key quotes
“Our base case remains that progress in the vaccine rollout in many DMs will allow the relaxation of restrictions by mid-2021, supporting a rebound in economic activity and a further recovery in corporate earnings.”
“So long as vaccine rollout progresses broadly according to plan, we suspect that the positive rotation towards coronavirus-vulnerable sectors, and stock markets which are more exposed to them, will resume as policy remains accommodative.”
“The upshot is that we forecast price gains of ~15-30% in the major MSCI’s indices of DM equities between now and the end of 2022, both in local-currency and in US dollar terms, as the sectors and countries badly hit by the coronavirus crisis recoup further ground.”
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