First quarter 2021 Global Outlook

Western Asset: Our base case outlook is for a U-shaped global economic recovery. Here, we provide a summary of the key drivers behind our global outlook and describe where we see value across global fixed-income markets.

    EXECUTIVE SUMMARY

    • We expect central banks to remain extraordinarily accommodative, especially given ongoing subdued inflation pressures, a recognition that global growth remains fragile and the persistence of downside risks.
    • In the US, growth has slowed from the spectacular pace of 2020, but that is only to be expected as activity in most sectors re-approach pre-COVID-19 levels and activity in other sectors continues to be restrained by sustained strictures on businesses and by consumer fears.
    • We expect Europe to rebound in 2021, albeit subject to large cross-country variation as a result of very different recovery potentials, different speeds of vaccine rollout, but also due to the discretionary deployment of fiscal policy.
    • In China, we expect the 2H20 economic rebound to extend over the next several years as the economy resumes its structural transition away from low-end manufacturing and investments toward consumption, services and the information technology sectors.
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    WHAT ARE THE RISKS?

    Past performance is no guarantee of future results.  Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

    Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.

    U.S. Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.