|KEY MARKET MOVEMENTS (% change)|
|FTSE All Share||-0.35||0.82||4.03||15.00||29.86||5.76||5.27|
|Euro Stoxx 50||0.20||1.13||3.56||20.72||35.41||12.79||9.76|
|MSCI Asia Pac.||1.58||2.97||-3.03||-0.01||13.15||13.82||11.25|
|MSCI Emerg. Mkts.||0.75||2.58||-1.89||2.06||16.42||12.43||10.08|
|Jo’burg All Shares||0.12||6.22||1.83||17.38||27.54||12.59||8.97|
|UK Gov’t Bonds||-0.33||-3.39||-4.66||-7.73||-6.26||2.80||1.58|
|US Gov’t Bonds||-0.37||-1.94||-1.74||-3.08||-2.87||4.91||2.25|
|Global Corp. Bonds||-0.42||-1.84||-1.57||-1.41||1.18||6.56||4.26|
|Emerg. Mkt. Local||-1.04||-2.47||-2.88||-7.02||-0.89||3.92||2.49|
Figures in the respective local currencies as at the end of trading on 22/10/2021.
From an economic standpoint, the week of 18 October brought signs of regained momentum in both the US and UK on the back of encouraging forward-looking flash purchasing managers’ index (PMI) data. The IHS Markit US composite PMI rose to 57.3, up from 55.0 in September, and the IHS Markit/CIPS UK composite PMI rose to a three-month high of 56.8 in October, versus 54.9 for the previous month. These numbers were in contrast to the fall in flash Eurozone composite PMI to 54.3, a six-month low and a continuation of the trend of slowing growth in the region, although activity remains firmly in growth territory.
The flash PMI data comes at a time when the Bank of England has been keen to signal a rise in interest rates to safeguard against inflationary expectations, with markets pricing in a hike at the next meeting on 4 November 2021.
And although not an immediate indicator of inflationary risk, it is worth noting that September’s lower than expected UK consumer price index figure of 3.1% does not include the recent rise in oil prices and the knock-on impact on the country’s highest ever petrol prices – the implications for which are being closely scrutinised.
Despite this economic uncertainty, we’re seeing strong Q3 earnings figures coming through, with around 85% of the companies that have reported beating expectations with above-trend earnings growth.
Finally, as economies continue to edge into recovery mode after the pandemic, there was positive news on vaccine boosters, as a study conducted by two labs found a booster dose of Pfizer’s COVID-19 vaccine was 95.6% effective against symptoms of the disease.
With a strong start to Q3 earnings season underway, we saw a broadly positive period for riskier assets, with developed and emerging markets (+1%) matching the returns of growth and value stocks over the previous 30-day period. Taking an industry focus, cyclical sectors outperformed, with real estate (+3%) leading the way. Oil continues its upward trajectory towards a multi-year high. Fixed income yields are also shifting upwards, due to a mix of the ‘risk on’ tone in markets, the spectre of inflation and central bank rhetoric around rising interest rates.
|UK GDP (QoQ)||5.5||–|
|UK CPI (YoY)||3.1||–|
|EU GDP (QoQ)||2.1||2.1|
|EU CPI (YoY)||3.4||–|
|US GDP (QoQ)||6.7||2.8|
|US CPI (YoY)||5.4||–|
Looking across our portfolios, we continue to see a supportive environment for equities. However, with some signs of growth moderating, our preference remains for domestic developed markets – specifically pan-Europe – where economies are reopening and valuations are not stretched on a relative basis.
We also continue to see a less conducive environment for fixed income assets, where starting yields are at historically low levels and inflation poses a clear threat to mid to longer-duration positioning. And real assets remain attractive, in our view, as an alternative to fixed income given they offer some protection against inflation – protection which is positively correlated given yields typically rise as interest rates do. Infrastructure is of particular interest, given current valuations and the sector’s recovery potential.
27 Oct • UK Autumn Budget | 28 Oct • EU Consumer Confidence | 28 Oct • US Q3 QoQ GDP (advance estimate)
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Sources: Nedbank Private Wealth and (1) Bloomberg; (2) Reuters; and (3) IHS Markit.
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