You are currently viewing the United States website Institutional website. You can change your location here or visit other RBC GAM websites.

Welcome to the RBC Global Asset Management site for Institutional Investors

In order to proceed to the site, please accept our Terms & Conditions.

This RBC Global Asset Management (U.S.) Website is intended for institutional investors only.

For purposes of this Website, the term "Institutional" includes but is not limited to sophisticated non-retail investors such as investment companies, banks, insurance companies, investment advisers, plan sponsors, endowments, government entities, high net worth individuals and those acting on behalf of institutional investors. The Website contains information, material and content about RBC Global Asset Management (collectively, the “Information”).

The Website and the Information are provided for information purposes only and do not constitute an offer, solicitation or invitation to buy or sell a security, any other product or service, or to participate in any particular trading strategy. The Website and the Information are not directed at or intended for use by any person resident or located in any jurisdiction where (1) the distribution of such information or functionality is contrary to the laws of such jurisdiction or (2) such distribution is prohibited without obtaining the necessary licenses and such authorizations have not been obtained. Investment strategies may not be eligible for sale or available to residents of certain countries or certain categories of investors.

The Information is provided without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and does not constitute investment, tax, accounting or legal advice. Recipients are strongly advised to make an independent review with an investment professional and reach their own conclusions regarding the investment merits and risks, legal, credit, tax and accounting aspects of any transactions.

Accept Decline
org.apache.velocity.tools.view.context.ChainedContext@24d4e04d
Jun 15, 2021

The latest wave of COVID-19 infections is now retreating, allowing governments to incrementally reopen their economies. Strong growth, surging corporate profits and elevated investor confidence have helped to extend the bull market and boost global equities to record highs.

Economy

  • As containment of the virus improves and economies gradually reopen, considerable pent-up consumer and business demand is being unleashed and permanent scarring from the pandemic so far appears to be limited.
  • Risks that may challenge our positive base case scenario include further waves of virus infection, fiscal hangover in 2022 and the withdrawal of central banks stimulus.
  • Another key risk is that Inflation has spiked higher but we believe much of the increase is temporary.
  • Our economic forecasts are mostly at or slightly above the consensus, a marginally less bullish positioning than in past quarters.

RBC GAM GDP forecast for developed markets

RBC GAM GDP forecast for developed markets

Note: As of May 27, 2021. Source: RBC GAM

Fixed Income

  • Much of the good news related to vaccines, a reopening of economies and firming inflation was priced into the bond market in late 2020 and early 2021, and so there was little impetus for yields to rise further in the past quarter
  • Our models indicate the acute valuation risk evident in the sovereign-bond market immediately following the pandemic’s declaration was greatly alleviated by the rapid rise in yields over the past year.
  • In the shorter term, we see 10-year U.S. government bond yields peaking around 1.75% over the next year and, as a result, expect low returns in sovereign bonds.

10-year government bond yields

10-year government bond yields

Note: As of May 31, 2021. Source: RBC GAM

Equity Markets

  • Global equities extended their gains in the past quarter with most major indexes reaching record levels, and our global composite of equity-market valuations is now at its highest level since before the 2008/2009 financial crisis.
  • Return potential improves as we move outside of North America to regions such as Europe, Japan and emerging markets, all of which offer more attractive valuations.
  • While the S&P 500 Index may currently appear expensive, it could grow into these elevated valuations fairly quickly as a surging economy lifts revenues and earnings.
  • We think a significant overweight in equities is appropriate in this environment. That said, we recognize U.S. equity valuations are now full and have therefore trimmed our overweight equity exposure by 50 basis points from last quarter, sourced entirely from U.S. equities.

S&P 500 equilibrium

Normalized earning and valuations
S&P 500 equilibrium

Note: Fair value estimates are for illustrative purposes only. The bands’ boundaries capture one standard deviation of movement above and below this estimate. Corrections are always a possibility and valuations will not limit the risk of damage from systemic shocks. It is not possible to invest directly in an unmanaged index. Source: RBC GAM

Discover more insights from this quarter's Global Investment Outlook.

Disclosure

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 investors 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.

In Canada, this document is provided by RBC Global Asset Management Inc. (including PH&N Institutional) which is regulated by each provincial and territorial securities commission with which it is registered. In the United States, this document is provided by RBC Global Asset Management (U.S.) Inc., a federally registered investment adviser. In Europe this document is provided by RBC Global Asset Management (UK) Limited, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this document is provided by RBC Global Asset Management (Asia) Limited, which is registered with the Securities and Futures Commission (SFC) in Hong Kong.

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 and permissible, 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.

® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © RBC Global Asset Management Inc. 2021
Publication date: June 15, 2021