Amid prospects for a brighter post-pandemic market environment in 2021, growth and quality assets, particularly those in the United States and China, offer some upside risk for investors.

With the outlook for Covid-19 vaccines increasingly positive and the first vaccinations being rolled out, short-term market buoyancy is likely as economies open fully and restrictions on movements are lifted. But the longer-term outlook is less certain.

“While we are very comfortable with our expectations for a strong economic rebound in 2021, we are increasingly focusing our sights on everything that comes after that surge,” says Rick Lacaille, global chief investment officer at State Street Global Advisors.

“A combination of alertness and agility is most likely to reward investors, as recession gives way to a powerful but temporary rebound, followed by an unknown new baseline of growth.”

Despite the challenges, investors will see opportunities in markets in 2021, particularly in the US and China, the two strongest economies post-pandemic.

China was the first nation to see the outbreak of Covid-19, but the swift and stringent control measures it has implemented have proved effective in containing the virus, allowing the recovery process to continue largely uninterrupted thus far and forestalling the possibility of renewed shutdowns.

China will be the only large economy to see positive GDP growth in 2020, estimated at 2.5%. However, this positive outlook should be tempered with a note of caution over the longer term given its high debt levels, deteriorating demographics and ongoing geopolitical tensions potentially posing challenges.

“We expect earnings growth in China to be especially resilient, and the Chinese growth and consumer stocks most appealing. We also believe that Chinese fixed income assets and the renminbi are very attractive, given the yield pickup and because we see room for further currency appreciation,” says Lacaille.

The US is also expected to experience substantially less GDP decline in 2020 compared to other developed economies. Its economy is forecast to contract by 3.7% versus declines of 9% in the United Kingdom and 7% in the eurozone.

“Joe Biden’s recent election win has sparked new speculation on the scale, timing and characteristics of further stimulus packages. Our outlook is that a smaller-but-sooner support package since a larger-than-expected package could trigger further questions about the potential for rising inflation,” Lacaille says.

While the pandemic continues to rage, US stock brokers are relatively positive on the prospects for US stock market in 2021 with Goldman Sachs forecasting a 17% upside to about 4,300 points based on expected increased corporate earnings and a low interest rate environment that remains favorable for corporations. Morgan Stanley, Wells Fargo and LPL Financial all have end-of-2021 targets for the S&P of 3,900, representing about 6% upside to current levels.