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Managing to the Other Side

New vaccines could accelerate recovery, boost cyclical sectors

Justin Thomson, Chief Investment Officer, International Equities
T. Rowe Price,  Global Market Outlook, December 2020

Key Insights

  • New coronavirus vaccines offer a potential lift for economies in 2021. However, a spike in COVID‑19 cases could slow recovery in the first quarter. 
  • Economic improvement could shift spending from firms that gained during the pandemic to cyclical names damaged by it, potentially favoring value over growth. 
  • Fixed income investors will need to be creative in 2021, as low yields and tighter credit spreads could make attractive returns harder to find. 
  • Social and economic upheaval caused by the pandemic could worsen political divisions. Tensions between the U.S. and China are another potential flashpoint.


The 2020 global pandemic tested the ability of companies and investors to manage their way through an unforeseen and dangerous period. However, T. Rowe Price investment leaders believe the other side of that journey could come into view in 2021 if new vaccines and continued fiscal and monetary stimulus add momentum to the economic recovery.

Rapid progress with a first wave of new vaccines based on messenger RNA (mRNA) technology clearly is the most hopeful sign, says David Giroux, chief investment officer (CIO), Equity and Multi‑Asset.

“The vaccines are an unmitigated positive, and I believe the next wave of them will be as efficacious or more efficacious than the mRNA vaccines,” Giroux says. “This could allow us to get back to normal at a faster rate.”

A broader economic recovery is likely to benefit many of the sectors that were most damaged by the virus, such as travel, leisure, energy, and financials, notes Justin Thomson, CIO, International Equity. However, technology, e‑commerce, and home delivery firms that saw sales surge during the pandemic could face tough earnings comparisons.

A stronger recovery in 2021 would carry risks for bond investors, warns Mark Vaselkiv, CIO, Fixed Income. He says investors will need to be creative in seeking out fixed income sectors—such as floating rate bank loans and emerging market corporates—that potentially can do well in a rising interest rate environment.

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