{{r.fundCode}} {{r.fundName}} {{r.series}} {{r.assetClass}}

You are currently viewing the Canadian website. You can change your location here.

Terms and conditions for Canada

Welcome to the new RBC iShares digital experience.

Find all things ETFs here: investment strategies, products, insights and more.

.hero-subtitle{ width: 80%; } .hero-energy-lines { } @media (max-width: 575.98px) { .hero-energy-lines { background-size: 300% auto; } }

Financial markets have enjoyed an incredible run since last March. In the U.S., the enormous recovery resulted in strong overall returns in 2020. Despite recent volatility, the strength has largely continued into 2021. The U.S. market is now up over 20% since the start of last year.

What’s been driving the recovery in the U.S.? Where might things go from here? To provide some perspective, we caught up with Brad Willock, Vice President & Senior Portfolio Manager.

Why have markets performed so strongly over the course of the COVID-19 crisis?

The massive amount of monetary and fiscal support has been the main factor in keeping markets moving higher since March 2020. In the U.S. it currently totals ~$11.6 trillion, which is ~54% of U.S. GDP. For context, the stimulus package put together in 2009 after the financial crisis amounted to ~10% of U.S. GDP. The Biden administration has now proposed another massive stimulus package which may be passed in the coming weeks.

What about the impact of recent vaccine progress?

There have been several positive developments in the fight against COVID-19:

  • The number of daily cases has sharply decreased since the start of the year.
  • The number of daily vaccine doses administered has been steadily increasing.
  • Just this week, Johnson & Johnson’s single-dose vaccine was approved in the U.S.

This should further accelerate the pace of inoculation. President Biden now expects that the U.S. will have enough vaccine supply for all American adults by the end of May.

What is the outlook for growth in 2021?

Economists are expecting economic activity levels in 2021 that haven’t been seen in over 20 years. The median projection calls for U.S. real GDP to grow by more than 4% in 2021. Historically, when real GDP growth exceeds 4% it has led to extremely strong S&P 500 earnings growth. This is consistent with analyst expectations which call for S&P 500 earnings to grow by over 20% in 2021.

What near-term risks are you watching?

Inflation is the largest near-term risks for investors. For context, the Fed has a mandate that focuses on full employment and inflation of 2% over the long run. Given there are still millions of people unemployed in the U.S. and inflation is below 2%, the Fed can remain accommodative at the moment. However, with the massive amount of stimulus and most commodity prices on the rise, inflation will likely be above 2% in the coming months. We expect the Fed to claim that the uptick in inflation is temporary and to remain accommodative as it focuses on the employment part of its dual mandate.

What is your outlook for U.S. equities?

S&P 500 earnings will largely depend on the level of stimulus and the pace of the re-opening as determined by the virus and the vaccine rollout. The price-to-earnings multiple (the price the market is willing to pay for earnings), will likely depend on the Fed and the markets view on if/when they will stop being accommodative. In a bull case scenario, we could see continued robust earnings growth and elevated market valuations that could produce high single to double-digit returns over the next year. Of course, there are a broad range of potential outcomes and we are constantly monitoring new developments.

Read more insights from the RBC North American Equity Team.

Publication date: March 5, 2021


This document is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or its affiliated entities listed herein. This document does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. This document is not available for distribution to people in jurisdictions where such distribution would be prohibited.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc., RBC Global Asset Management (U.S.) Inc., RBC Global Asset Management (UK) Limited, RBC Global Asset Management (Asia) Limited, and BlueBay Asset Management LLP, which are separate, but affiliated subsidiaries of RBC.

Additional information about RBC GAM may be found at www.rbcgam.com.

This document has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the above-listed entities in their respective jurisdictions.

Any investment and economic outlook information contained in this document has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions.

Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.

RBC GAM reserves the right at any time and without notice to change, amend or cease publication of this information.

Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter time periods. It is not possible to invest directly in an index.

Some of the statements contained in this document may be considered forward-looking statements which provide current expectations or forecasts of future results or events. Forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Do not place undue reliance on these statements because actual results or events may differ materially from those described in such forward-looking statements as a result of various factors. Before making any investment decisions, we encourage you to consider all relevant factors carefully.