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January 19, 2021

2021 Outlook – U.S. Equities



We are emerging from a year that saw the steepest economic decline in the U.S. since the government started keeping records. The path to recovery is centred around two currently approved vaccines, with potentially more to come. The current timeline is for the vast majority to receive a vaccine by mid-year.


As a result, we continue to expect elevated cases of COVID-19 and slowing economic growth in the first half of the year. However, once herd immunity has been reached following widespread vaccination, we should see a rapid snapback. Driving factors of an improving economy and corporate profits include:

  • Elevated consumer savings: So far this year, consumers have saved 16.8% of their disposable income, well above the historical level of 7.5%.
  •  Declining unemployment rates as businesses reopen: Unemployment is currently double pre-COVID-19 levels at 6.7%.
  • Higher corporate margins following significant cost restructurings and accelerated adoption of technology solutions.
  • Record low interest rates and easily available liquidity should allow for business investment to quickly follow consumer demand.
  • Loss of small businesses resulting in larger (typically public) companies gaining share: Concerns regarding the long-term impact of the pandemic on small businesses should be offset by elevated levels of new business formation. These new businesses tend to focus on opportunities created by changes in consumer behaviour.


Positioning and opportunities


As bottom-up investors, we make investment decisions on a company-specific basis. However, in general we are positioning our portfolios to benefit from a return to normal. Within this theme, we remain focused on companies with structural tailwinds that can compound capital overtime. It is likely some businesses may never fully recover due to changes in consumer behaviour. We look to avoid these businesses despite very attractive valuations in many cases. We are finding opportunities within small caps, which tend to outperform large caps when the economy is improving.


Two companies that we believe to be attractive within this framework are:


Boston Scientific Corp.: Boston Scientific develops and manufactures minimally invasive medical devices. Hospitals faced shutdowns and reduced capacity in 2020. During peak lockdowns in the second quarter, revenues dropped 28.7%. Most of these procedures have been deferred as opposed to cancelled due to their non-discretionary nature, such as changing a pacemaker. As such, we believe that once restrictions are removed, they should be able to grow above the historical mid-single digit growth rate for an extended period.


Sensata Technologies Inc.: Sensata manufactures sensors and controls to global consumers in automotive, heavy vehicle and industrial applications. These components provide mission-critical functionality and are a small portion of the overall cost of the product. As vehicles and electronics become more complex, they require more sensors. This creates a natural tailwind for Sensata to grow at a rate faster than underlying production. In general, most of Sensata’s end markets have seen demand outpace supply in 2020. This is predominately due to plant shutdowns that occurred in the second quarter due to government mandates. During that time, Sensata significantly reduced costs. We expect once restrictions are lifted, these industries will begin to produce above demand as inventories are very low. This, combined with the cost reductions, should result in above trend growth and margin expansion.



  • Short-term results will likely remain weak if not worsen for some companies due to elevated case counts and increased government restrictions. We continue to stress test liquidity scenarios for our most impacted holdings.
  • The rollout of the vaccine is either ineffective, slower than anticipated or the virus itself mutates, limiting the efficacy.
  • Inflation could become a problem. Governments have added a significant amount of money supply to the system. As consumer confidence improves, we would expect the velocity of spend to also rise, which could increase inflation and ultimately result in higher interest rates.
  • Tax hikes are a likely possibility. Government deficits have skyrocketed and the U.S. has a new ruling party that seems more open to raising corporate and personal capital gains taxes.


Despite these risks, we remain fully invested and believe the worst of the COVID-19 pandemic is behind us. Despite being cognizant of certain pockets of the market that seem extremely overvalued to us. We still see many attractive areas to invest in. Equities are still of great value to us, especially relative to other asset classes.


Source: CI Global Asset Management and Bloomberg Finance L.P. as at December 22, 2020.


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About the Author

Aubrey Hearn

Aubrey Hearn

Vice-President and Senior Portfolio Manager
CI Global Asset Management

Aubrey joined Sentry Investments in 2005 and has more than 15 years of experience in the financial industry. Aubrey has a keen understanding of business dynamics, a dedication to internal research and a strong focus on investing in high-quality, dividend-paying companies. In 2015, he was named Investment Executive’s Mutual Fund Manager of the Year*, which recognizes exceptional and consistent fund outperformance over 10 years.


Aubrey is the lead manager of Sentry Small/Mid Cap Income Fund and Sentry U.S. Growth and Income Fund, and co-manager of Sentry U.S. Monthly Income Fund. He is also a member of the management team for the company’s flagship fund, Sentry Canadian Income Fund.


Aubrey graduated with an Honours Bachelor of Commerce degree from Memorial University. He also holds the Chartered Financial Analyst (CFA) designation.


*Investment Executive (“IE”) selects the Mutual Fund Manager of the Year by ranking all funds with a 10-year performance record in a point-based scoring system. The funds are ranked based on annual returns, IE relative outperformance and quartile performance. Other criteria factored into the methodology include cumulative 10-year returns, management expense rations and correlation to the fund’s benchmark index.



This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.


The opinions expressed in the communication are solely those of the author(s) and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed.


The author and/or a member of their immediate family may hold specific holdings/securities discussed in this document. Any opinion or information provided are solely those of the author and does not constitute investment advice or an endorsement or recommendation of any entity or security discussed or provided by CI Global Asset Management.


Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe” or “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Global Asset Management and the portfolio manager believe to be reasonable assumptions, neither CI Global Asset Management nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.


Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change, which may impact the information contained in this document.


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© CI Investments Inc. 2020. All rights reserved. Published December 30, 2020