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Global investment outlook report 2021 From Meixin Financial Research Institute

The following is the Global investment outlook report 2021 From Meixin Financial Research Institute recommended by recordtrend.com. And this article belongs to the classification: global economy , Investment & Economy, research report.

Global wealth growth

According to the Global Wealth Report 2020 issued by Credit Suisse Research Institute, compared with 2019, the total global wealth increased by US $36.3 trillion. Although from January to March 2020, the net global household wealth decreased by US $17.5 trillion, or 4.4%, and the global per capita wealth decreased by 4.7%, the total global wealth in 2019 increased by 4.7% compared with 2018 8.5%, therefore, there is ample room to absorb any losses during the 2020 COVID-19. In addition, thanks to the measures taken by the government and the central bank to mitigate the consequences of covid-19, since March, the stock market has rebounded and house prices have soared. According to the existing data, the level of household wealth in most countries has at least roughly recovered to the level at the beginning of the year. However, as the decline of GDP and the increase of debt will lead to long-term damage, wealth growth will be restrained in the next few years or even longer. Therefore, we believe that global wealth will slowly recover from the subsequent impact of COVID-19 in 2021. Among the world’s major economies, only China is expected to have substantial wealth growth during this period, and the relative loss of wealth in the UK is the most significant. It is worth noting that the overall wealth inequality in the United States has declined. More importantly, the distribution of global wealth will change with the change of household wealth pattern in various countries and regions. China is likely to change and become one of the countries that benefit the most.

Global household wealth rebounded in the middle of the year, and covid-19 did not have a significant impact on it

Overall, global wealth rebounded from the downturn in the first quarter of this year to the end of June, an increase of $1 trillion or 0.25% compared with $399.2 trillion at the end of 2019. But that’s lower than the growth in the number of adults over the same period, so the wealth per adult fell by 0.4% to an average of $76984 from $77309 at the beginning of the year.

Only China and India’s total household wealth rose in the world

In the first half of the year, only in China and India did total household wealth grow by 4.4% and 1.6% respectively. China and North China could have grown healthily, but this time COVID-19 has come to nothing in the North American region, and has caused losses in other regions besides China and India. Latin America was the worst affected, with a decline of 12.8% in wealth, followed by Africa, with a decline of 2.5% in total household wealth, most of which was attributed to currency devaluation, which led to an increase in the loss of GDP.

Changes in the stock market and house prices do not directly threaten household wealth

People regard personal wealth as a kind of insurance to survive the “extraordinary period”, and people’s behavior of turning assets into cash reflects the fact that families are avoiding risks. Under the impact of COVID-19, even in developed countries, many families lack the “extractable assets” and “borrowing capacity”. The whole world is facing a real problem of shortage of funds. Beginning in mid February, the global stock market fell sharply under the panic of COVID-19. However, when the government and the central bank began to play a role, the stock market, which fell sharply due to the panic, began to rebound. Although many countries have not yet fully rebounded, on the whole, the stock market has reversed from its initial decline. On the non-financial side, there is no downward trend in global house prices or real estate prices. During the epidemic period, the government promulgated Measures of isolation and closure, employees had to work from home, coupled with the background of low interest rates, in some countries, people’s interest in real estate (especially rural real estate) has been aroused again, and the global real estate price has no downward trend. Therefore, the trend of stock market and house price will not pose a direct threat to family wealth.

Global wealth growth forecast in 2021

From a global perspective, the growth of global wealth will resume in 2021, but it will grow slowly at an annual rate of 3.4%. According to this growth rate, the average growth rate between 2020 and 2021 is 1.4%, which is far lower than the growth rate in recent years, and also lower than the growth rate we expected under the background of no epidemic. We predict that wealth growth will resume in almost all regions next year, though at a very different rate. Per capita wealth in China and India will grow at a rate of 9%, similar to that of the past few years. Latin America will also recover at a healthy rate of 6%, but this growth rate means that the average wealth at the end of 2021 will be 6% lower than the starting value. The growth rate of Europe and Asia Pacific region (excluding China and India) is expected to be 3%, which is similar to the growth rate of the world as a whole, with net growth at the end of 2021. It is worth noting that the per capita wealth in North America may continue to be weak, due to the wanton spread of covid-19 in the United States and the high dependence of the United States on financial assets.

General situation of global high net worth population

Global distribution of ultra high net worth (uhnw): the largest number in the United States and China

According to the statistics of Credit Suisse Research Institute, at the beginning of this year, there were 175690 ultra high net worth people (uhnws) in the world with net assets of more than $50 million. Among them, 55820 have assets of at least US $100 million, and 4410 have wealth of more than US $500 million. By region, North America is the dominant region, with 92740 ultra-high net worth people (53%), while Europe has 32280 ultra-high net worth people (18%), and other Asia Pacific countries excluding China and India have 20240 ultra-high net worth people (12%). In terms of countries, the United States has an absolute advantage in the number of ultra-high net worth people with 89510, accounting for half of the world’s total. China ranked second with 21090 ultra-high net worth individuals, followed by Germany (6524), India (4590), the United Kingdom (3900) and France (3710), Canada (3210), Japan (3140), Russia (3030) and the Hong Kong Special Administrative Region (2910). The total number of ultra-high net worth individuals increased by 16759 (11%) in 2019, but decreased by 122 in the first half of 2020. Among them, in 2019, the growth of ultra-high net worth individuals in the United States accounted for 84% of the global growth, while China accounted for 25%. In Germany, France, India, Canada, Italy, the Netherlands and Sweden, the number of new ultra-high net worth individuals exceeded 200. In 2019, the total number of ultra-high net worth people will decrease by 1146 in the UK, 701 in Switzerland and 453 in South Korea. However, it should be noted that the number of millionaires in these countries is on the rise during this period. Therefore, there is evidence that the wealth of high net worth groups is redistributing, but it is not the overall contraction of ultra-high net worth groups. Britain, Brazil, South Korea, the United Arab Emirates, Mexico, Japan, Spain, Thailand and Belgium, the number of ultra-high net worth in these countries continues to decline to 2020. Since January 2019, the number of ultra-high net worth people in Brazil and the UK has fallen by more than 30%.

The total wealth of the billionaires reached a new high

On March 18, the world’s top 1000 billionaires were concentrated in the United States, China and Germany, according to Forbes. From March to the end of June, except for the Hong Kong Special Administrative Region and Israel, the average net worth of the other 18 countries and regions in the table showed an upward trend. It is worth noting that at the end of June, only the average net worth of China, Japan and South Korea increased compared with February 2019, which is related to the vigorous development of the automobile industry and technology industry in the above three countries Entrepreneurs and capitalists engaged in related industries can get high returns, while the performance of billionaires in the United States and Italy is relatively poor. These two countries are affected by the epidemic, and many industries such as manufacturing, science and technology, agriculture and so on are affected. Until the end of July 2020, according to the report of the billionaires in 2020, after the V-shaped rebound of asset prices in this year, the total wealth of the billionaires reached US $10.2 trillion, a new high, exceeding the peak of US $8.9 trillion at the end of 2017. There are 2189 billionaires, up from 2158 in 2017.

By industry, the wealth of the billionaires was divided: technology and medical treatment led the rise strongly

Although the overall wealth of the billionaires has reached a new high, covid-19 has spawned a group of business innovators and subversives, who are among the leaders of today’s economic change by using technology. Therefore, the current trend of wealth differentiation is obvious: the wealth of the billionaires who conform to the trend of the times, innovate and subvert in the industry is still increasing, and they are in line with the trend of economy and technology The wealth of the billionaires, who are on the opposite side of social and environmental trends, is declining. This state of differentiation has not existed 10 years ago, so special attention should be paid to it. The specific manifestations of this differentiation in different industries are as follows: in 2018, 2019 and the first seven months of 2020, the total wealth of the technology industry’s billionaires increased by 42.5% to US $1.8 trillion due to the soaring technology stocks. Meanwhile, the wealth of the billionaires in the health care sector has increased by 50.3% to $658 billion 600 million, thanks to drug development and diagnosis and medical technology innovation in the new era, as well as the recent stimulation of COVID-19 treatment and equipment. In general, the growth trend of technology, health care, industry and other fields is good, while the entertainment, financial services, materials and real estate industries lag behind other fields, and the net wealth growth rate of their billionaires is only 10% or even lower. UBS believes that the COVID-19 crisis has only accelerated this differentiation.

Portrait of high net worth people in China

Based on the data of China Merchants Xinnuo, the main high net worth group with family net assets of more than 10 million accounts for 50%. 16.1% of the high net worth people are “technology upstarts”, making the first bucket of gold in their lives in the Internet and technology industry. The “old money” group from the real estate, construction and financial industries is still the area where high net worth people gather, accounting for 30.4%.

Most of them were business owners / top managers (38.0%), followed by middle managers (28.8%). Most of them are private (33.8%), followed by state-owned (20.6%), and foreign capital (17.4%) and state-owned enterprises (6.6%) only rank fourth and fifth, which indicates that the current talent flow with the market mechanism of salary, and the inherent concept of enterprise nature has been broken.

Asset allocation of high net worth people in China

Through this survey, we know the following conclusions: in the asset allocation of high net worth people, financial investment products (financial management, stocks, funds, asset management plans, etc.) account for the highest proportion, up to 73.6%. The number of people who buy insurance is second, more than those who choose to deposit. This shows that in terms of family wealth security and sustainability, the choice of target groups is relatively diversified, and the role of insurance in wealth protection has been recognized by high net worth people. The number of people investing in real estate has dropped to fifth.

Under the influence of COVID-19, the asset allocation of high net worth people has been adjusted. 55.9% of people plan to increase the ratio of financial investment products, while the ratio of financial investment products before the outbreak is 35.5%. 46.4% planned to increase the proportion of insurance, compared with 13.2% before the epidemic.

Global family office

In 2020, the global family office will mainly invest in the technology industry

The family office market represents a highly diversified pattern of private wealth. There are several obvious investment trends of global family offices in different industries: 61.4% of global family offices invest in technology industry, 45.1% in consumer goods, 44.2% in business services industry, and 44.1% in healthcare and biotechnology industry.

Due to the private nature of family office, compared with other investment institutions, it has less restrictions on the distribution of capital. Through the research, we believe that the main factor leading to the preference of family office for some industries is the alpha income generated by the investment. The second is the relationship between family industry and investment industry. Family groups engaged in a certain industry are more willing to invest in familiar industries. As can be seen from the figure below, wealth mainly comes from family offices in the technology industry, accounting for 82.5% of the investment in the technology industry; wealth mainly comes from family offices in the real estate industry, accounting for 64.9% of the investment in the real estate industry; in a word, families maintain a consistent and unique investment preference for familiar industries.

The relationship between family office location and investment preference: Asian family offices show stronger investment preference

There is a certain correlation between family office location and investment preference. For example, family offices based in Asia show a stronger investment preference for consumer goods, healthcare, biotechnology and financial services industries, while those based in Europe prefer to invest in hard assets and real estate.

Family office tactical portfolio adjustment

Despite the fact that economic activities stopped and market volatility intensified under the influence of COVID-19, most family offices did not fundamentally change their asset allocation framework, but rather made tactical adjustments to their portfolios. During this period, the family office was divided into two camps: opportunists and conservatives.

Speculators take advantage of market chaos and volatility to buy oversold assets, while conservatives increase cash, gold, mature market stocks, bonds, real estate and other assets to reduce risk exposure. According to UBS Research Institute data, in May this year, nearly half (45%) of the family offices planned to increase the allocation of real estate, a similar proportion planned to increase the allocation of mature stock market, and a smaller proportion planned to increase the allocation of developing stock market.

Private equity is the key driving force to obtain return on investment

More than two-thirds (69%) of family offices see private equity as a key driver of return on investment. More than half (52%) of the family invested in private equity for the purpose of diversification, as this asset class will not be impacted by stock market fluctuations. It is worth noting that 77% of family offices are invested in private equity.

At the beginning of March, 73% of investors expected that private investment would bring higher return than public investment. However, after the stock market crash and economic stagnation, the expected return of family offices on private equity declined. The number of people who thought that private investment would bring higher return than public investment dropped to 51% in May. This is due to the stock market crash in March, some undervalued stocks and bonds provide more opportunities for investors.

According to the data, 71% of family offices invest in private equity to expand and increase capital, and 68% of family offices tend to invest in industries they are familiar with, which shows that private equity is the extension of entrepreneurs’ career. Among them, information technology (77%) and health care (60%) are the preferred investment sectors. But family offices usually spread their investment in four to five sectors, such as information technology, health care, real estate, non essential consumption and communication services.

Family office’s enthusiasm for sustainable investment rises

Family offices are increasingly interested in sustainable investment. Two thirds (62%) of households believe that sustainable investment and wealth inheritance are equally important.

At present, the family office mainly adopts the exclusion based investment strategy, accounting for 30% of the total investment. However, from the perspective of growth in the next five years, the proportion of ESG integration investments allocated by family offices will increase rapidly, from 9% to 19%, more than doubling. At the same time, impact investing will expand by more than half, from 9% to 14%.

When family offices invest in influence, they give priority to “return on investment”, followed by “environmental and social impact”. From the specific types of participation, education, health care / Health Technology / medical technology are the key areas of influence investment.

Although sustainable investment has attracted the attention of family offices, there are still some family offices who are reluctant to make sustainable investment. The main reason is that these family offices are satisfied with the current portfolio and unwilling to make changes. The secondary reason is that these family offices want to maximize the return on investment and participate in philanthropy rather than sustainable investment.

The total wealth of the billionaires reached a new high

On March 18, the world’s top 1000 billionaires were concentrated in the United States, China and Germany, according to Forbes. From March to the end of June, except for the Hong Kong Special Administrative Region and Israel, the average net worth of the other 18 countries and regions in the table showed an upward trend. It is worth noting that at the end of June, only the average net worth of China, Japan and South Korea increased compared with February 2019, which is related to the vigorous development of the automobile industry and technology industry in the above three countries Entrepreneurs and capitalists engaged in related industries can get high returns, while the performance of billionaires in the United States and Italy is relatively poor. These two countries are affected by the epidemic, and many industries such as manufacturing, science and technology, agriculture and so on are affected. Until the end of July 2020, according to the report of the billionaires in 2020, after the V-shaped rebound of asset prices in this year, the total wealth of the billionaires reached US $10.2 trillion, a new high, exceeding the peak of US $8.9 trillion at the end of 2017. There are 2189 billionaires, up from 2158 in 2017.

Forecast of 2021 economy in different regions of the world

Under Biden’s basic assumption of splitting with Congress, a fiscal plan will be issued in the first quarter of 2021, and the subsequent fiscal stimulus measures may decline. The UBS Research Institute predicts that in 2021 and 2022, the US GDP will grow by 2.8% and 3.0% respectively, and the economy will still be significantly weak. Affected by the acceleration of vaccine process, the real GDP growth rate of the United States will increase by 1% in 2021, which is mainly due to the increase of service expenditure and the release of suppressed demand. The Fed is on hold until the end of the forecast period. The Federal Open Market Committee (FOMC) has promised to keep interest rates at zero until inflation reaches 2% and the economy achieves “full employment”. We believe that none of these conditions have been met.

Review of the U.S. economy in 2020

The US economy rebounded strongly from the bottom, but by the end of the year the momentum had slowed down significantly. The U.S. economy bottomed out at the end of April. In May, U.S. employment increased and spending began to rise sharply. But after a record rebound in the third quarter, the economy has lost momentum; business investment fell in the third quarter; and the real estate industry is booming. With record low mortgage rates and pent up demand, the construction industry has returned to decline. The labor force participation rate is still very low.

Two factors affecting American economy

The U.S. election and vaccine research and development are two key factors that determine the future of the U.S. economy. As far as the US general election is concerned, if the Democratic Party wins the election, the federal government may bring more fiscal stimulus than we predicted. This is because the president and Congress decide fiscal policy. As far as vaccines are concerned, the effectiveness and adoption rate of vaccines will affect consumer spending and broader economic areas. If vaccines are effectively implemented, consumer spending will fully recover and exceed the level before the epidemic.

Basic forecast of American economy

In the first quarter of 2021, there is expected to be a modest fiscal relief package of $450 billion. However, due to the current rebound trend of the epidemic, it will weaken in the first half of 2021. Assuming that the vaccine will be injected effectively next year and produce antibodies in the population, the consumption expenditure is expected to accelerate in the third quarter of 2021 as the number of infected people decreases. Based on the above forecast, pent up demand and still highly loose monetary policy provide conditions for sustained recovery. The GDP growth rate is expected to be 2.8% in 2021 and 3.0% in 2022. Real GDP will reach its pre epidemic level in 2022q1. Rapid economic growth will effectively stimulate the labor market. It is estimated that an average of 323000 new jobs will be created every month in 2021. With the increase of labor force participation rate, the unemployment rate will continue to decline. It is estimated that the unemployment rate will reach 5.8% by the end of 2021 and 4.7% by the end of 2022. Due to the overall weakness of the market and the weak inflation, the inflation of core personal consumption expenditure will be seriously restrained in 2021. In 2022, the inflation rate is expected to rise by 1.7%, but it does not meet the expectation. As the inflation is restrained and the unemployment rate is still rising, the Federal reserve may not be able to reach the set interest rate increase standard by the end of 2020.

Basically, the dust of this election has been settled, but the two parties in the United States are still anxious about the Senate seat contest, which is expected to come to a conclusion in January 2021. Therefore, the United States is faced with two situations: [congressional split] and [Democratic victory]. We will predict the U.S. economy based on the above two situations.

Hypothesis 1: Congress splits

The $450 billion package, a streamlined version of the Senate Republican bill, will be passed in the first quarter. The GDP of the United States will grow by about 2.8% in 2021, and the unemployment rate will be 5.8% by the end of 2021. If the vaccine process is on time, economic growth will begin to pick up by the end of 2021. With monetary policy still loose, GDP will accelerate to 3.0% in 2022. Economic growth and rising labor force participation have led to a decline in the unemployment rate, which is expected to reach 4.7% by the end of 2022. In this case, GDP in 2022q1 will return to its pre epidemic level. The PCE inflation rate is lower than the Fed’s inflation target, and the labor market will not fully recover.

Assumption 2: the Democratic Party wins a landslide

In January 2020, the government will provide us $1 trillion in epidemic relief. Even if the fiscal multiplier weakens, real GDP will still surge. Although the Senate’s weak advantage is questionable, we assume that from the second half of 2021, there will be years of spending and modest tax plans. With the decline of new crown cases, the average growth rate in the second half of 2021 was 7.9%. Based on the fourth quarter data, we expect the overall GDP growth rate to be 6.6% in 2021. Overall, GDP will reach the pre epidemic level in the third quarter of 2021. Based on the data of the fourth quarter, it is estimated that the economic growth in 2022 will reach 4.4%. Most of the strong growth will come from consumer spending, and business investment will be very strong. The unemployment rate will drop rapidly and is expected to reach 3.5% by the end of 2021, but it is expected to rise slightly to 3.8% by the end of 2022. Even if the economy expands rapidly, it will not completely eliminate the economic weakness. By the end of 2022, the inflation rate of the consumer price index (CPI) will be 1.9%, and the personal consumer price index (PCE), the target set by the Federal Reserve, will be only 1.8%.

JPMorgan’s 2021 investment strategy for major institutions

Dominant volatility

We suggest investing in relatively high-quality mortgage bonds, but in the current environment, hedge funds should be added to supplement fixed income. In the stock market, some types of risk exposure may be better than the whole market. We need to find companies with strong balance sheet and stable growth curve. If the earnings volatility of historical positions is caused by the global recovery process, then we are still willing to buy because the implied trend continues, which also provides revenue opportunities for mature active managers, such as structured notes, which can be flexibly configured and repositioned.

Mining benefits

In 2021, for many investors, the outlook is bleak, with interest rates in the global fixed income sector at a long-term low level; 25% of all investment grade bonds have a negative yield. The mark of the times: Greece’s 10-year bond price is 65 basis points (BPS); Portugal’s bond price is 4 basis points; but in fact, 26 basis points must be paid to Ireland every year to buy bonds. The low yield environment is unlikely to change soon, which is the current policy stance of global central banks. In the US, the Fed – 29 – has linked future interest rate increases to specific outcomes (the highest level of employment and an average inflation rate of 2%). There is still a long way to go to meet these standards. The policy rate is expected to be close to zero for many years. At present, the market does not want the fed to raise interest rates before the end of 2023. Meanwhile, in Europe, policy rates have been negative since 2014 and are likely to remain unchanged for the next decade. The BoJ’s expectation of an interest rate increase cycle does not exist. Investors seeking returns should face the possibility that the world’s three major central banks may not raise interest rates for a long time. The yield on BB bonds is about 5%, and the expected default rate has reached its peak. In the future, moderate leverage can be carried out (managed as part of the overall portfolio). It can improve the effective rate of return in some cases.

Follow the trend

Which stocks are most likely to double, triple, quadruple or more in the next few years? We think the best direction is these three trends: digital transformation, healthcare innovation and sustainability. Why the three? Considering that over 1700 stocks have contributed to the returns of the MSCI World Index over the past five years. But more than 60% came from technology and health care. At the same time, in terms of sustainability. Look at the performance of clean energy and electric vehicles: they have increased by nearly 100% and 33% respectively. These trends can not only increase the investment portfolio, but also promote the market in the next few years. The epidemic has forced the world to operate in a digital economy, and has also given birth to new ways to diagnose and treat diseases. These major trends still have room for development.

Digital transformation is the market trend in 2020. Businesses, consumers and families have learned how to live in the online world. However, this trend is just beginning. It is estimated that the number of 5g smartphones purchased by consumers will double to 450 million by 2021. However, for the consumer market, the real opportunity may lie in enterprise applications. Manufacturing is expected to account for 19% by 2030, second only to health care. Future factories may achieve 5g as soon as possible for the following reasons: robots will not get sick or spread viruses; automation can also drive cost savings and improve productivity; global capital expenditure may increase, including investment in automation; leaders will continue to focus on technology investment (including automation) to achieve growth rather than cost reduction; and trade between China and the United States Tension has encouraged manufacturers to localize their supply chains.

There is a strong demand for Healthcare Innovation: in fact, for the covid-19 and many other diseases, a lot of investment opportunities lie in testing and diagnosis. The demand for medical innovation has been clear and widespread for a long time. According to the World Health Organization, one sixth of the world’s deaths are caused by cancer. Now, advances in coronavirus detection technology will enable other detection functions (for influenza, pregnancy and later diseases) to be available at home, at airports or at care points. Liquid biopsy is a pioneering medical diagnostic tool that can obtain plasma from patients and provide important information for cancer and potential treatment. Fluid biopsies can cost as little as a few hundred dollars, and doctors can detect some form of cancer within a year. Sampling patients through liquid biopsy may enable oncologists to grasp more comprehensive information and more accurate treatment methods.

Sustainability has become the mainstream. Why is circular economy so important? At present, there are 7.8 billion people in the world, which is expected to reach 2 billion by 2050. The pressure on the earth will multiply, and 2021 is likely to be a turning point. For example, the EU ban on disposable plastics will come into effect in 2021, while the world is turning to agricultural technology (AGTech) to use modern technology to improve the yield, efficiency and sustainability of traditional food production. Vertical agriculture (growing food in vertical stacks indoors) has received a lot of attention.

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