A cyclical recovery in the global economy is well underway as the year of the pandemic is giving way to the year of the vaccine. Wealthier countries around the world with successful vaccine rollout programs could be almost back to normal levels of mobility by the fourth quarter of 2021. This will mean an acceleration in economic activity and consumption as vaccinated consumers move about freely for the first time since the winter of 2020.
Two primary factors help determine where in the world to invest. First, a successful vaccination program. Second, an ability to provide fiscal stimulus. Countries that are able to do both will likely have a faster economic-recovery path, and this is likely to be reflected in their equity markets.
Along with the United States, a number of countries present compelling opportunities. North American neighbors Canada and Mexico look attractive. And following a dismal period exacerbated by Brexit, the United Kingdom appears set for a cyclical recovery. While countries in the European Union offer disparate prospects, those with exposure to Emerging Europe also might do quite well.
There are two caveats to the vaccine-plus-fiscal-stimulus plan. First, several countries—such as China—are already well down the recovery path, so their gains might actually lag the rest of the world as their growth decelerates from the end of 2020. Second, poorer commodity exporters in the emerging world may surge in 2021, despite a lack of adequate vaccines and fiscal stimulus, as the rest of the global economy comes back online and demands more of their raw materials.