Risk on

After a horrible year with devastating human losses globally, investment bankers beamed themselves to a different universe, dealt with skyrocketing IPOs, SPACs, equities, etc. Risk on mode triggered heavily, with the help of vaccination efforts in developed countries, huge plans in infrastructure investment, supports for the common people to survive, at least for now. The UK and the U.S. have made rapid progress on vaccinations, positioning them well to restore near-normalcy by early summer. The EU’s slower efforts mean containment measures there are likely to remain for a few months longer than in the U.S. Across the U.S., the UK and the EU, households have built up excess savings of as much as 8-10% of GDP since the start of this crisis, thanks to fiscal transfers and forced savings due to lockdowns. So, this may result a boost in consumption as economies re-open. A strong world economy and accommodative financial conditions should continue to support risk assets over the next few quarters.


The world economy is set to grow at its fastest rate in decades, powered by large U.S. fiscal stimulus, COVID-19 vaccination progress and excess savings built over the past year. The U.S. and China are set to be twin engines of strong global growth this year, with the EU a relative laggard. We expect global GDP growth of 6.4% in 2021 and 4.7% in 2022, with the U.S. and China growing at 6.7% and 9.4% respectively this year. Much of the rise in U.S. yields has, in our view, been due to stronger growth, not just fears of runaway inflation. This can explain why risk assets have navigated the rise in bond yields so well. The biggest risk now, we feel, is that U.S. inflation rises such that the Fed is forced into a hasty exit of COVID -19 era accommodation, and is far more aggressive than current market pricing. However, we think this is unlikely. We expect U.S. inflation to moderate by the end of 2021, after a mid-year spike.

Ajay Rajadhyaksha, economist, Barclays Capital, April 1


There have been 378 initial public offerings (IPOs) in the U.S. in the first three months of 2021. That’s more than in any full calendar year between 2003 and 2019. The $139 billion raised so far this year is more than two and a half times the yearly average over this period. They already have what was raised last year ($179 billion across 450 IPOs) clearly in their sights. After a two-decade period where the number of U.S. public companies fell by almost half, this is a welcome resurgence. 79% of this year’s IPOs by number and 69% by value have been by what are known as SPACs – Special Purpose Acquisition Companies. Between 2003 and 2019, an average of 17 SPACs a year listed on the U.S. stock market, with the high point being 66 in 2007. Last year, there were a record-breaking 248 SPAC IPOs, more than the previous 12 years combined. Unbelievably, that record has already been broken. 297 have listed in only the first three months of 2021, and the amount of money raised surged to $97 billion.

Duncan Lamont, analyst, Schroders, March 31

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