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Vantage Point - Transitory?

Welcome to another edition of Vantage Point. Since we published last quarter, world economic activity has continued to pick up strongly, particularly in those countries that have rolled out vaccinations to a large proportion of the population. Financial markets priced in the strong ‘V’ some time ago, and are now looking beyond, with much focus on what will happen to inflation particularly in the US. We cover this reassessment and its impact on markets and investment conclusions in our new Vantage Point.
 

Monthly Market Roundup

 

JULY 2021

The Fed Changes Tone

  • Global stocks gained 1.4% in June for the fifth positive month in a row bringing the YTD return to 12.6%.
  • Returns were widespread but strongest in the US as the S&P 500 delivered 2.3% (15.3% YTD) followed by emerging markets’ 1.4% (7.6% YTD) and -1.4% (9.2% YTD) in non-US developed markets.
  • Tech and growth stocks outperformed as the NASDAQ was 5.5% higher (12.9% YTD), US growth delivered 6.7% (13.1% YTD) vs. -1.0% for value (15.9% YTD), and information technology was the top sector in the S&P 500 (6.9%; 13.2%) as materials (-5.5%; 13.5%) and financials (-3.1%; 24.5%) lagged.
  • Tech and growth outperformance was supported by a shift lower in yields as the 10-year Treasury dipped 13 bp in June to 1.47% but then fell another ~20 bp through July 8 to the lowest since February.
  • Despite increasing and higher-than-expected inflation data along increasing signs of upward price pressure, both market and consumer-based inflation expectations have softened.
  • Both the Fed and market view higher inflation as transitory and the Fed’s new rate guidance removed concerns that the central bank would let the economy run too hot before tightening policy.
  • The ability for the labor market and supply side to meet the pick-up in demand remains key to the inflation outlook.
  • The global growth recovery has become more uneven due to the varying levels of pent-up demand, savings, stimulus, Covid cases, and vaccine rollout success.
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JUNE 2021

Inflation in Focus

Global stocks gained for a fourth month in a row and increased 1.6% bringing the YTD return to 11.0%.

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MAY 2021

Accelerating Recovery

Risk-on sentiment persisted in April as economic improvement continued to accelerate.

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Points of View

What’s priced into markets?

The global economy remains broadly on track for a strong recovery, though...

The good news is not evenly distributed across countries and inflation concerns remain.
 

 

Read More

Household savings and corporate cash: igniting growth post Covid-19?

The global economic recovery remains uneven across regions and sectors but financial markets were buoyant over the last months of 2020 and have started 2021 strongly.

 

Read More

Global Economics and Investment Analysis Group

Meet the minds behind the research.

Shamik Dhar

Chief Economist

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Lale Akoner

Market Strategist

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Bryan Besecker, CFA®, CAIA

Market Strategist

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Sebastian Vismara

Financial Economist

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MARK-179764-2021-03-26