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A recovery from the pandemic will be erratic but loose monetary policy around the world and vaccine optimism would keep risk assets supported, a global markets strategist at Invesco said on Wednesday.

Asia-Pacific equities, specifically markets in Greater China and North Asia, are expected to rise on COVID-19 containment measures, a rebound in economic activity and increased capital expenditure from the 5G rollout, David Chao, global markets strategist for Asia Pacific at Invesco, told the Reuters Global Markets Forum.

“I am very much overweight equities over fixed income... 2021 could be a great year for emerging market (EM) stocks,” Chao said at the Reuters Global Investment Outlook Summit, 2021.

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Stock markets in the United States are expected to go through a period of correction, Chao said, adding that a broader rotation into value and cyclical stocks in the near-term was likely.

“From a fundamental standpoint, widespread inoculation will fuel a pickup in global demand, which should see cyclicals and value stocks rally relative to growth,” he said.

From a valuation perspective, Chao said, the disparity between value stocks, at 17 times price-to-earnings (P-E), and growth stocks, at 38 times P-E, was greater than the early-2000 record.

“For a continued rally of value stocks, there needs to be economic growth, higher inflation, rising bond yields and improved corporate earnings, which will hinge on a vaccine being approved and available to the public,” he added.

Chao expected the U.S. dollar to weaken in the first half of 2021 due to ample liquidity from the Federal Reserve’s ultra-loose monetary policies and additional fiscal stimulus measures.

For those same reasons and as a vaccine becomes available, Chao said inflation could “finally start to rear its head” in the second half of 2021.

“There will be a day of reckoning ... and the first sign will be inflation and then credit defaults. However, that day isn’t on the horizon just yet,” he said, while adding that those policies are needed globally to ensure the pandemic doesn’t cause permanent economic damage.

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