Massive central bank liquidity is a given for 2021
Central banks around the globe are expected to continue to add massive amounts of liquidity in 2021. Given that excess liquidity is positively correlated to the valuation of risky assets such as equities, central bank policy will remain a tailwind for the market. In addition, as GDP growth turns negative again in many parts of the world as a result of rising Covid-19 case numbers, some central banks, including the ECB, will increase their bond buying programs in the near future. Hence, while the focus has shifted to the timeliness and effectiveness of a Covid-19 vaccine, ongoing monetary stimulus will provide a solid backstop for risky assets going forward.
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