Skip to main content Skip to main navigation
Skip to access and inclusion page Skip to search input

Global Investment Services - Perspectives 2021

The global pandemic has dominated the past few years and as a result, the pace of change has never been faster


Our assessment has found that there are several pillars of consideration that have since intensified and accelerated following the COVID-19 pandemic and, in our view, will have longer-lasting effects on the world for years to come.

The global green capex super cycle is finally upon us

As governments move beyond their most immediate fiscal support objectives defined by the COVID-19 pandemic, we expect their remaining fiscal capacity to be targeted towards creating sustainable industries and durable drivers of permanent employment in domestic markets.

To that end, we anticipate opportunities arising from significant investment in decarbonisation and sustainable infrastructure in the US and Europe to gain faster momentum over the next few years.

In particular, the US is expected to prioritise its attention to lagging US infrastructure, focusing on a cleaner platform of modern utilities and the build-up of 5G-enabling capabilities.

The changing landscape for global commodities

As the world begins to invest in more sustainable initiatives, we expect there will be a gradual but visible shift in the demand and supply attributes of various commodities.

We anticipate that the biggest beneficiaries of this focus are palladium, copper, and natural gas at the expense of commodities such as oil and coal, given the increasing number of countries providing legally binding pledges for net-zero carbon emissions by 2050.

Copper is expected to emerge as the key beneficiary of the global green transition, underpinned by an increase demand from electric vehicles and renewable energy. As for iron ore, it is likely China’s high priority focus on environmental issues will gradually start to constrain its domestic furnace-based steel sector production and emissions from late 2021. We also expect gold to experience a tempered price range, as the peak demand for gold has passed and US real yields are gradually improving from their negative yield levels.

Central banks to finally develop a medium-term focus on underlying societal issues

The convergence of monetary policy with societal issues is expected to become clearly visible over the next few years. The US Federal Reserve continues to distinguish itself by being very focused on societal issues, and we expect more central banks to surprise markets by striking a balanced tone between short-term economic recovery and the fundamental issues around long-term economic prosperity.

Central banks, including the European Central Bank, are starting to push for deeper analysis of income and wealth inequality to gauge and develop the path for their monetary policies. Climate considerations are also becoming more prominent, with central banks now telling businesses to create incentives for decarbonisation. We also see central banks as a dormant, but potentially major competitor in digital currencies. By developing their own digital currencies, central banks are looking to create digital alternatives to cash and maintain monetary sovereignty in the face of rapid development of private payment alternatives.

Fundamental divergences to lead current and interest rate markets

The challenges of obtaining enhanced yield have been amplified. We expect short-term Australian real yields (after adjusting for inflation) will at best only move from negative to zero levels over the next few years. This, in our view, will continue to guide the importance of identifying risk-considered Australian yield enhancement opportunities at a time when credit spreads globally are at levels below those where markets stood before the COVID-19 pandemic in early 2020.

We also expect;

·       Global medium to long-term rates to further rise, led by the US.

·       Positive medium-term interest rate differentials to re-emerge in favour of the US

·       Medium to long term inflation to stay within its lower bounds


The next ten years will be the golden area of healthcare innovation

We believe the COVID-19 crisis is a seismic catalyst for progress and that by 2030, the healthcare industry will have shifted from reactive to proactive and preventative. Within this, we expect a marked acceleration on a number of fronts in the overall spectrum of healthcare innovation; from better collaboration between government and private sector, to a significant increase in resources committed to research excellence, breakthrough therapies, diagnostics and medical technologies.

We also believe the healthcare investment opportunity in China is widening in breadth. Through its “Made in China 2025” strategy, China intends to transform itself into a global high-end manufacturing powerhouse over the next decade, including in areas such as biopharma and high-performance medical products.

Real estate markets entering their most critical phase in modern times

For us, real estate is about quality. The COVID-19 pandemic has only magnified the importance of that foundation, which is defined by asset-specific attributes, the critical role of an asset, and tenant business model sustainability.

We expect differentiation between prime and secondary assets, as well as A-grade and B-grade assets, to persist and widen over time. However, there is also a limit to the level of price premium one should pay for high-quality assets. We believe this discipline is now immensely needed given the record low levels of medium-term interest rates, the shrinking supply of high-quality opportunities and the increasing valuations for these assets.

Australia’s housing affordability is also reaching a record low, and we believe this has further deteriorated for our future generations. This affordability challenge adds to our conviction that it is only a matter of time before build-to-rent trends accelerate and Australians return to the rental market. We also expect the trend for people to search for and acquire properties in regional hubs, including regional Australia, to continue.

Learning to live with higher and demanding asset market valuations

In 2020, the global economy decelerated as various parts of the world went into a sudden economic halt. However, global equity markets (as measured by major equity indices) fully recovered by the end of 2020 in anticipation of better economic conditions in 2021 and beyond.

The environment for fundamental theme and sector selection is improving and is more critical than ever before. We expect a meaningful level of productive opportunity to be available for those that can be selective and have the capacity to allocate capital to fundamentally driven ideas that are differentiated to the broader equity markets.

Structural themes, including cloud adoption and cybersecurity, have notable potential for future growth over the next few years, despite having performed well to date. Similarly, we expect investment opportunities that are fundamentally robust, yet currently overlooked by investors, to offer undemanidng valuations compared to their growth potential.

Rising sector-based volatility sets a backdrop for productive opportunity, especially in Asia

We believe the combination of fundamental discipline, active management and overall macro awareness will be the prism for opportunity extraction in equity markets at this stage of the global equity market cycle.

We expect a higher degree of stock price volatility over the next two years for several reasons, including changing geopolitical landscapes, current levels of valuations, localisation of supply chains creating winners and losers globally and the lack of equity markets’ ability to truly appreciate the operating strength of leading innovative business.

Combined with rising sector and stock-based volatility, we believe the balance of opportunity has shifted from opportunity on the long side to opportunity on both the long and short side.

If you’d like a full copy of the 2021 edition of Perspectives, please contact your Private Banker.

About the author

George Toubia is the Chief Investment Officer of Private Wealth – Westpac Group. Starting his career at Bankers Trust Australia, George joined Westpac Private Bank in 2011. As Chief Investment Officer, George identifies themes in global markets that are empowered by structural drivers, thereby seeking to uncover the investment opportunities and beneficiaries of those themes before they become widely recognised. George leads a team of six investment analysts who together form the Private Wealth Investment Team and are responsible for identifying and selecting investment opportunities for Private Wealth's Global Investment Service (GIS).

Read more

Global & Business Views

Leadership & Opinion


Things you should know

Westpac Private Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian Credit Licence 233714.