Dec 3 (Reuters) - The "risk-on" stock market rotation ofrecent weeks may not last long into 2021 as it has largelypriced in the roll out of COVID-19 vaccines and an economicrecovery next year, according to the head of global marketstrategy at French asset manager Natixis.
Esty Dwek told the Reuters Global Markets Forum thatinvestor allocations in December would suggest how far thetrade, where some of the "cyclical", growth-dependent stocks hithardest in the coronavirus crisis recover, has to run.
"Once we add November and December, how much catch up willbe done already" Dwek asked in a conversation held as part ofthe Reuters Global Investment Outlook Summit 2021.
Based in France, Natixis Investment Managers manages about$1.06 trillion in assets, making it a major player on financialmarkets.
Dwek said she did see room for stocks in Europe and emergingmarkets, led by Asia, to catch up to Wall Street.
"Risks are mostly idiosyncratic - domestic politics, globaltrade, U.S.-China tensions, and debt levels, but for now we seemore tailwinds than hurdles," she said about emerging markets.
U.S. fiscal stimulus will, however, not be large enough toresult in material inflation, despite recent jumps inmarket-priced inflation expectations.
U.S. 5-year, 10-year and 30-year breakeven rates
"The inflation we will probably get in the middle of nextyear will be transitory and due to base effects," Dwek said,adding that any further weakness of the U.S. dollar would belimited.
Aside from COVID-19 and a lack of government spending, Dwekfeels geopolitical tensions are the biggest threat to growthnext year as investors may be too sanguine about U.S.President-elect Joe Biden's foreign policy.
"Expectations are for an easing in tensions with China, butit will not be as smooth as people expect, [while U.S.]relations with Europe should improve, challenges remain ondigital tax, trade and green initiatives," she said.
For other news from Reuters Global Investment Outlook Summit2021, click
(Reporting by Lisa Mattackal and Aaron Saldanha in Bengaluru;Editing by Patrick Graham and Arun Koyyur) ((LisaPauline.Mattackal@thomsonreuters.com ; +919945309224;Reuters Messaging: lisapauline.mattackal@thomsonreuters.com@reuters.net))
