The rollout of vaccines at the beginning of the year was expected to be the silver bullet that ushered the global economy back to normal. While global vaccination campaigns have resulted in the gradual easing of restrictions, issues with efficacy against new variants and hesitancy mean that the path to full recovery has been slower than initially expected. Furthermore, disruption to supply chains and labor shortages have also resulted in bottlenecks that are preventing the economy from operating at full potential. The net result is that economic momentum has been decelerating, and economists are now reducing GDP growth expectations for the balance of 2021. For the first time since the pandemic started, we think the market may be pricing in too rosy an outlook and may be vulnerable to a resetting of expectations. Based on our ongoing risk-reward assessment, we have been reducing the equity weight in our model portfolios.
Above-average uncertainty has been a hallmark of the post-Covid period. For much of the past 18 months, forward-looking capital markets have done a reasonably good job cutting through the fog of uncertainty to price in the economic recovery currently underway. During much of this period, the global economy has outpaced relatively conservative expectations, forcing regular upward revisions by economists to their forecasts. However, with economic data consistently missing expectations over the past two months, it now appears that forecasts may have become too optimistic, especially in light of ongoing pandemic-related restrictions and labour and supply chain disruptions. With economists now trimming Q3 and 2021 full-year GDP growth forecasts, we expect equity markets to also lose short-term momentum as analysts scrutinize earnings estimates for the remainder of 2021 and 2022.
Since November 2020, when vaccine developers reported high efficacy rates, we have been carrying an overweight equity position in our model portfolios. Due to the confluence of high valuation and slower than expected pace of recovery, we have recently opted to reduce our equity weight to a neutral position by cutting select portfolio positions (described below). This gradual reduction in equity weight is also consistent with our view that 2021 returns would be skewed toward the first half of the year. Commensurately, the cash weighting in our managed portfolios is the highest since summer 2020. With short-term market risk-reward biased to the downside, in our opinion, higher levels of cash provide optionality in the event of market weakness.
Despite the modest reduction in equity weighting and our cautious short-term view, we remain optimistic in our outlook. In our opinion, the recovery is simply delayed, not cancelled. Should this prognosis prove correct, markets may undergo an adjustment period. We also expect that a gradual reduction of monetary and fiscal stimulus in the coming months could add to short-term volatility. With seatbelts fastened and meaningful cash available for redeployment, we are prepared for any rough patches that may lie ahead.