Eq: Total Market

(New York)

For those paying attention, ESG has had a great run over the last year. While many may feel that in an intangible way, the real world results are strong too, with ESG investments outperforming the S&P 500 by 1.3% in 2020. ESG investment experienced some solid outperformance early in the pandemic because if its natural defensive. Millennials appear to be driving the trend, which seems likely to only increase. More generally, the environment has become a major focus for both retail investors and major asset managers, like BlackRock, which has helped make the sector mainstream.

FINSUM: Our best call for ESG is that it will do great in 2021. The main reason being that the Biden administration is bringing a strong and renewed focus on the environment, which will both awaken public consciousness but also give ESG some favorable regulatory tailwinds.

(New York)

Goldman Sachs has been one of the biggest bulls on the street so far in 2021. The bank is calling for 6.6% GDP growth and a strong year for the S&P 500. However, in the last week they have been backtracking a bit and pointing out some of the key risks to the economy and market. Whether or not investors like it, Goldman has a very clear risk risk—COVID variants. The bank says that if the new variants make the current vaccine ineffective, then all bets for the market are off. Based on the current science, that seems unlikely to happen. But nonetheless, there are intermediate risks, such as the new variants slowing down herd immunity or making consumers more fearful about going out/spending/the economy, both of which could have unforeseen negative consequences on the economy.

FINSUM: The new virus strains are a big risk. While the current vaccines don’t seem likely to be rendered useless, consumer fear of the new variants could slow down the recovery. Notably, Goldman says its baseline forecasts don’t include any of these eventualities.

(New York)

Goldman Sachs has been leading Wall Street in its bullish outlook for 2021. The bank has been forecasting 6.6% GDP growth, a full 2.5% above the consensus forecast. However, the bank just published a note which represents the first backtrack on that call. The bank pointed out that the new strains of COVID could pose a risk to growth. In particular, they explained that if the current vaccines do not give a high degree of protection against the new COVID strains, then the spending boom which they forecasted this year might be delayed to 2022. In the bank’s own words, if the new strains require a new vaccine “Virus-sensitive spending would likely retrench while a new vaccine is developed, and although a new vaccine could be approved in less than five months, the consumption boom would likely be delayed until 2022”.

FINSUM: We are sure they made this admission with some frustration as GS has been quite bullish. That said, they did so because it is very realistic. It should be noted that most authorities say that the current vaccine should cover the new strains.

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