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DZ BANK Research – Outlook 2021

  • Global economy grows by 5 percent
  • Central banks drive ultra-expansionary monetary policy
  • DAX to reach 14,000 points by the end of 2021

In 2021, the world will gradually free itself from the shackles of the corona pandemic. For the coming year, DZ BANK Research anticipates a strong recovery of the global economy and forecasts growth of 5 percent. The announced vaccine and the election of the new US President Joe Biden are boosting the markets. The analysts at DZ BANK expect the DAX to rise to 14,000 points by the end of 2021 - the chase for new records can thus begin afresh in the post-corona boom. The continued ultra-expansionary monetary policy of central banks is also driving indices higher. The relationship between the US and China, which with a growth rate of 8.8 percent will also be a pace-setter for the global economy in 2021, is likely to intensify further despite a Democratic president. DZ BANK Research forecasts economic growth of 3 percent for Germany.

2020 was a year for the history books. The global economy slumped by 4.2 percent compared to the previous year. The big shock will be followed by the recovery in 2021 though. The DZ BANK economists expect strong growth of 5 percent, driven by a worldwide post-corona boom, especially in the second half of the year. The prospects of prompt availability of a vaccine against Covid-19 are cause for optimism. On the other hand, there are ongoing issues of conflict. Brexit remains unresolved and disputes between the United States and China continue. Joe Biden has shown himself to be a hardliner as regards China with a "Buy American” strategy a clear feature in his election campaign.

For the US, DZ BANK analysts are forecasting GDP growth of 4.6 percent for 2021, following a decline of 3.6 percent in the current year. The new administration is likely to introduce a fiscal programme quickly after taking office. However, due to the Republican majority in the Senate, this is likely to be a maximum of one trillion US dollars and so less than planned. The efforts of the United States under its new president to focus more strongly on multi-lateralism will not be reflected in its relations with China. The American trade deficit with China in the pandemic summer was more than 26 billion US dollars - that is already 8 billion dollars less than at the beginning of 2019, but the new US administration will also want to reduce it further. "The conflict between the United States and China continues under Joe Biden. The Middle Kingdom is US’s strongest rival. This is one of the reasons why Biden has not promised a hasty reduction of the still existing punitive tariffs against China," says DZ BANK chief economist Stefan Bielmeier.

DZ BANK economists expect economic growth of 3.8 percent for the Eurozone. Spain could emerge as the winner with growth of 5.3 percent - after a decline of 12.3 percent this year. The hitherto unresolved problem of Brexit, which is mainly a matter of reaching agreement on the internal market legislation, remains intense. From a free trade agreement to a no-deal, anything is still possible. This is a burden that is doesn’t do the EU any good in troubled times.

Germany 2021: After the recession comes recovery

For the first quarter, DZ BANK Research expects a recession and a year-on-year GDP change of minus 3.3 percent due to the renewed lockdown. The weakness at the beginning of the year also affects the growth rate for the year as a whole. The economic experts forecast a growth rate of 3 percent, thus correcting their previous estimate of 4.6 percent. The distribution of the corona vaccine over the course of the year will  lead to a boom in consumer spending. The restaurant and travel industry should benefit particularly from this. For 2022, DZ BANK Research is therefore forecasting growth of 4.8 percent.

Monetary policy: Central banks maintain their ultra-expansionary stance

To combat the consequences of the corona pandemic, the European Central Bank reacted quickly last spring with the Pandemic Emergency Purchase Programme and guaranteed the purchase of bonds in the amount of EUR 750 billion. As long as the inflation rate in the Eurozone does not approach the 2 percent mark on a sustained basis, the central bank is unlikely to abandon its ultra-expansionary course. ECB President Christine Lagarde will continue her efforts to achieve consensus in the Governing Council on monetary policy decisions. At the same time, capital market yields remain low in the long term under this ECB policy. "The policies of the central banks will continue to boost the global markets. The prices for real estate and gold will also continue to shoot up. Inflation will remain low, albeit somewhat higher than in 2020," explains Stefan Bielmeier.

Stock markets: Record profits possible

Following the historic slump last March, DZ BANK Research sees new records on the horizon for the end of 2021. "After recessions, German companies usually recover quickly. Profits will be back to where they were before the crisis by 2023 at the latest. The DAX could therefore smash its all-time high as early as the end of next year and even reach 14,000 points," says Christian Kahler, Head of Equity Strategy & Asset Allocation. All in all, Kahler believes that the investment year 2021 will be a good one. In addition to the prospect of a vaccine and more dependable global polics, the very friendly liquidity and central bank environment will play a decisive role in this regard. The financial experts at DZ BANK expect 3,600 points for the Euro Stoxx 50 and 3,800 points for the S&P 500.

Model portfolio: Exploiting opportunities on the stock market

"The key lessons for equity investors in 2020 were: Broad diversification, focus on solid companies, do not panic sell. This also applies to 2021," says Christian Kahler. In his model portfolio, he has bonds of US and European companies at around 15 percent each, securities of DAX companies at 11.5 percent and other European stocks at 5.6 percent. In the current year, DZ BANK's model portfolio has developed positively despite the historical crisis, and has grown by 4.7 percent. Since its launch in June 2011, the model portfolio has grown 7.5% per year, significantly more than the expected target return of between 4% and 5%.

Key forecasts by DZ BANK Research 2021

GDP growth Germany  (1) 3.0%
GDP growth EMU  (1) 3.8%
Inflation Germany  (1) 1.5%
Inflation Eurozone  (1) 1.1%
Crude oil  (2) 50 USD/barrel (Brent)
Gold  (2) 1.900 USD/fine ounce
Main refinancing rate ECB  (2) 0.0%
Deposit rate ECB  (2) -0.5%
US Fed Funds Target Rate  (2) 0.25%
Exchange rate USD/EUR  (2) 1.15
DAX  (2) 14,000 points.
EURO STOXX 50  (2) 3,600 points.

(1) Changes compared to previous year;  (2) Point projection for year-end 2021



Download: Presentation of DZ BANK Research on the 2021 Annual Outlook