Despite robust growth through the first two quarters of this year, the economic effects of the pandemic continue to be a drag on significant sectors as demand has outstripped supply slowing growth. When will the world return to pre-pandemic levels and how long will it take to get there?

From pandemic response to stimulus efforts, policy makers received mixed reviews in 2020, but one thing seems certain—politics might dominate the headlines but it’s going to be policy that drives prosperity into the future.

While 2020 did not necessarily produce the outperformance many active managers had hoped for, despite the predictions proponents made regarding the importance of active management during the crisis, neither did 2020 put a nail in active’s coffin. With negative interest rates and volatility top of mind for many investors, there is still room and time for active managers to adjust strategies to outperform their passive counterparts.

Even as defensive positions will likely rule the day, the hunt for yield will dictate new tactics when it comes to allocations. A trim in U.S. equities could mean more money to allocate to emerging market, European, and Asian stocks. Likewise, fixed income portfolios might see an increase in ESG/green bonds to offset potential negative rates; and alternatives could also see a boost as investments in private equity, private debt, infrastructure, gold, and cryptocurrencies.

Time will tell whether a focus on value, small cap and emerging markets will be a winning formula for 2021, but indicators point to strengthening performance amid rising allocations to riskier segments of the equity market as risk tolerance grows, backed by stronger earnings momentum and easing macro pressures.