Following our look back at 2020, we explore the themes that we envisage being important for 2021 and consider how these will influence our portfolios.

Green stimulus

Just hours after taking office in late January, President Joe Biden was eager to start addressing some of the climate change decisions made during Donald Trump’s presidency, including moving to re-join The Paris Agreement1. The Paris Agreement is a legally binding international treaty on climate change adopted by 195 countries in 2015 to keep global warming well below two degrees Celsius compared to pre-industrial levels2. Donald Trump’s perspective was that leaving The Paris Agreement would tie in with his image of a revitalised US with thriving energy production3, much to climate activists’ dismay.

Further action taken by President Joe Biden includes halting the cross-border Keystone XL oil pipeline, first proposed in 2008, by withdrawing the permit that Mr Trump granted4. The Keystone XL oil pipeline was designed to transport 830,000 barrels of Alberta tar sands oil, the planet’s dirtiest fossil fuel, to refineries on the Gulf Coast of Mexico5, creating huge concern for environmentalists. However, whilst re-joining The Paris Agreement will take effect after 30 days and the Keystone XL pipeline’s permit has been cancelled, for now, it must be noted that many intended changes to US environmental policy may take time to achieve over the coming year, often relying on a split Congress to agree to changes6. Thus, despite President Biden’s promise to act “on Day One”7, it could be a long and slow process to implement change over the coming year.

Whilst the green agenda is being pushed in the US government, it can also be seen at the forefront of Wall Street8, looking ahead for 2021. Larry Fink, the co-founder of BlackRock, stated this week that he believes we are seeing the beginning of a “long but rapidly accelerating transition” of capital to sustainable assets as investors increasingly consider climate risk as investment risk and are seeing great investment opportunities in this transition9. Despite speculation over growing bubbles in sustainable technology companies, such as electric car maker Tesla’s share price, it is important to understand the shifts towards a digitalised and decarbonised economy are here to stay, both of which have been accelerated by the pandemic10.

Back in the UK, the rolling out of Prime Minister Boris Johnson’s ’10-point’ plan for a green industrial revolution has promised to build back better, support green jobs, and accelerate our path to net zero11. Particularly promising is the UK’s effort to invest in offshore wind projects. The Offshore Wind Sector Deal, a partnership between the government and this sector, has stabilised regulation of offshore providing developers, supply chain companies and the financial sector with confidence to invest12. This is particularly potent given the UK has a larger capacity for offshore wind compared to any other country in the world, and the cost of electricity from offshore wind has fallen dramatically in recent years. Globally, the Ocean Renewable Energy Action Coalition has suggested that offshore wind could power one-tenth of global electricity demand by 2050, saving over three billion metric tons of CO2 annually13, with the UK being a major contributor.

Additionally, this year the UK looks forward to hosting the G7 summit in Cornwall where the world’s leading democracies will discuss tacking climate change. Prime Minister Boris Johnson’s choice to host the summit in Cornwall is no coincidence. Having previously been focused on tin and copper mines during the industrial revolution, the Prime Minister believes this is the “perfect location for such a crucial summit” as Cornwall will be the centre of great advancement once again14. Furthermore, Glasgow is due to host the COP26 in November, the 26th UN Climate Change convenience, highlighting the UK’s efforts to bring climate to the forefront of the global agenda this year.

The green agenda is very important to Holden & Partners with Sustainable Investing at the core of what we do and who we are. A good example of how this theme is playing out in our portfolios is through the recent introduction of 91’s Global Environment fund, which looks to invest in companies that are actively trying to solve climate crisis issues.

Emerging markets

On the back of a turbulent 2020 for emerging markets, the new year has brought some renewed optimism for investors. With COVID-19 vaccines now being rolled out and with a better understanding of the virus, confidence is slowly returning to recovering markets. Notable recoveries have been evident in many Asian countries such as Thailand, Cambodia15, Malaysia and South Korea where swift preventative measures to control the virus were effective. But as with many of these countries, there is still a way to go to recovery. Afterall, tourism has played a valuable role in bolstering economies globally, and with restrictive measures still in a place, other means of propping up the global economies have had to take seed. However, the continual introduction of stimulus packages phased in through government and central bank intervention is likely to support a general recovery in global trade and growth which is ultimately beneficial for emerging markets. A sign of this coming to fruition was shown last month, by investors pouring almost $17 billion into emerging market assets within the first three weeks of 202116, showing how the flood of central bank stimulus continues to drive the hunt for yield generating returns amongst investors. Within this timeframe, emerging market stocks have risen around 9% in dollar terms17, significantly outpacing developed markets.

For emerging markets, the US election results have of course also gone hand in hand with the US dollar. After periods of strength during the pandemic, the dollar has continued to remain weakened allowing emerging market currencies to strengthen within the same period. Since last March, the dollar has weakened. With the forecasts of many expecting the Federal Reserve to keep interest rates low, and notable fiscal stimulus likely to continue under the new administration, the fiscal deficit is likely to increase which suggests a lead to a stable or weaker US dollar. Stronger currencies due to increasing economic growth could result in emerging market assets becoming an attractive part of the portfolio.

First Sentier (previously Stewart Investors) Asia Pacific Leaders Sustainability, an investment fund held across many of our portfolios, should be well-placed to take advantage of the potentially positive environment presented by emerging markets currently.


Across the globe, COVID-19 cases remain near all-time highs18, yet markets showed signs of optimism following global vaccination efforts, looking past the current state of the economy to the potential recovery and macroeconomic boost from government spending and ultra-low bank rates. The combination of expansionary fiscal (government) and monetary policy supported economies across the globe as entire populations were forced to stay at home, combatting the deflationary pressures of the sharp economic contractions. Once deflationary pressures subside and the global recovery gains momentum, inflation will undoubtedly creep higher, but it is the type of inflation and the rate of growth that is debated. Sceptics argue that pre-pandemic trends will continue to subdue inflation, such as ageing demographics and technological displacement, or that inflation expectations are already priced into the market19. Japan serves as a reminder that super accommodative interest rates and high government deficits do not always equal an economy firing on all cylinders, and that fighting deflation is infinitely harder than tempering inflation.

Cyclical industries, those that are sensitive to the business cycle, were trampled in 2020 as economic activity submitted to the pandemic. However, with light seemingly at the end of the tunnel, investors are poising their portfolios around a new theme, reflation. Reflation is a form of inflation, but is the act of stimulating the economy, seeking to bring the economy (specifically price level) back up to the long-term trend, following a low point or dip. Reflationary trading, as we have seen over the three months, is set to buoy assets exposed to increased economic activity, pricing pressures and higher yields, such as financials and energy, at the expense of nominal bonds (that is bonds which make payments of a fixed amount, rather than an inflation-adjusted value) and asset classes with little inflation protection. Despite historical inability, if the combined central bank and government policy can stimulate growth and recovery while maintaining inflation at a reasonable level, investors may be set for another ‘goldilocks’ environment of above-trend growth and below-trend inflation.

Although we do not expect inflation to spike massively, we have been following its prospects for some time. We have an allocation to inflation-protected assets in our portfolios through inflation-linked UK government bonds and will keep a watchful eye on this area.


With the announcement of the Pfizer and BioNTech vaccine in November, excitement, hope, and optimism prevailed. But is the vaccine the golden elixir that will guide us out of the pandemic? At the time of writing, the rollout of the vaccine has been different across the globe. A top-level view would suggest that the UK is one of the leaders globally with over 9.2 million people who have received their first of two doses20. However, it is this two-stage process that is raising some concern. The vast majority of the COVID vaccines that are currently being used require an initial dose, then a follow-up dose several weeks later to reach full efficacy. With the prospect of the second dose being later than recommended by the drug producers, there is some concern that this process will lead to mutations of the virus that will become more vaccine-resistant21. It is not just the UK where there is potential for the virus to mutate and become more resistant to the vaccine; it could happen anywhere. Although worrying, we have seen over the last year that the collective power of companies and governments working together to achieve a common goal can yield remarkable results. We believe that this work won’t just stop, and the same energy will be needed to ensure that the vaccines are regularly updated to cope with mutations.

Although maybe not the golden elixir, the vaccine will become one of the most useful tools in our battle against the virus. We expect that COVID is here to stay, and once we are out of the current situation it will become a more normal part of the disease burden that currently exists on society. Routine vaccination is not unlikely.

Combined with other measures the vaccine will provide a route back to some form of normality, in whatever shape that may be. To take advantage of this recovery, Holden & Partners will continue to ensure that portfolios have a varied mix of assets across different geographical regions, to increase the likelihood that they will benefit from the recovery, whilst remaining protected from the ‘speed bumps in the road’.

We look forward to working with you for a positive, sustainable and inspiring 2021.






















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