Citi Global Wealth Investments expects that digitization, climate change, increased US-Chinese competition and government spending policies will reshape industries. The pandemic focused attention on these issues and their economic impact will provide many companies with new growth potential. This allow portfolios to move beyond our previous approach of “exploiting mean reversion” that focused on investing in areas hardest hit by the recession and riding the recovery. Additionally, our eyes are also on the many governments that intend to make greater investment in infrastructure reshaping their own economies.
“Long before the arrival of effective vaccines, we made the case for a full recovery in the global economy. We advised clients to remain invested and to add to their equity allocations early on,” said David Bailin, Chief Investment Officer and Global Head of Investments for Citi Global Wealth. “Now, we look to exploit the trends that will reshape the world after COVID. We caution, however, that many of the best near- term investments aren’t necessarily those we envisage leading markets higher longer-term. We want client portfolios to evolve and reflect the transformational opportunities to come.”
Unprecedented monetary and fiscal easing measures, effective vaccines and tech-powered productivity improvements have helped lower the chances of another economic contraction any time soon. Therefore, Citi continues to recommend allocations toward regions and industries where valuations do not reflect a full recovery. We have recently moderated our peak equity allocation for the first time since early 2020. We’ve pivoted from some “early cycle outperformers” to global health care and dividend growth shares to try to identify more enduring returns.
As the economic recovery continues to play out, long-term bond yields are likely to trend higher. That is why we still have a large underweight in bonds. Citi has added floating bank rate loans to portfolios that can do better in such an environment.
“While much of what we highlight in Mid-Year Outlook 2021 are portfolio approaches that will benefit from a steadily improving economic recovery, we also note areas of caution,” said David Bailin. “These challenges could include COVID mutations and cybersecurity concerns. That is why we seek to preserve and grow wealth by way of a globally diversified asset allocation rather than taking highly concentrated risks.”
What has gained momentum is Citi Global Wealth Investment’s focus on “Unstoppable Trends”. The pandemic promoted digitization - how businesses and consumer alike embraced new technology to live and work; greening the world – the collapse of fossil fuel demand and energy prices during the first lockdown and what that means for the rollout of clean energy; and the rise of Asia – how strategic engagement between China and the U.S. will look in the future.
The full report, a summary version, short videos, and other materials can be accessed here.
Citi Global Wealth was formed in January 2021 to deliver Citi’s wealth solutions, products and services globally to help enable clients achieve their financial goals.
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