A recent article in Proactive Advisor Magazine offers insights on the market outlook for 2021 from Tony Dwyer and his colleagues at Canaccord Genuity.

Here are key takeaways from the article:

• Easy money to continue given inflation expectations—low inflation has allowed the Fed to continue its zero-interest rate policy “for the foreseeable future,” the article argues. While many worry that excess liquidity could generate inflation, that doesn’t seem to be on the horizon.
• Current Fed policy drives historic excess liquidity. According to the article, “the Fed has made it clear their policies are driven by core inflation reaching an average of 2%” and, as a result, “money supply, excess liquidity, and easing financial conditions should help the economy continue to recover from the Covid-19 recession.”
• Synchronized global recovery driven by historic money availability—“Nearly every economic indicator saw the worst drop followed by the sharpest improvement in history,” the article notes, underscoring the importance of remembering that long periods of economic weakness occur when businesses are strapped for money but “that is clearly not the case currently given excess liquidity, a demographic tailwind, improved small-business and manufacturing optimism, and an inflection in the global outlook.”
• “Improved global economy could make our 2021 EPS estimate conservative,” the article says, noting that earnings could “reaccelerate in the second half of 2020, with full recovery by the end of 2021,” depending on the progress of the Covid-19 treatments and vaccines.

The article concludes by arguing that while the market will probably see bouts of volatility, “we believe the economy and market are in the beginning of a long-duration recovery” that will favor emerging markets, economically sensitive sectors, small-cap stocks, and commodities.