KEY MARKET MOVEMENTS (% change) | |||||||
1WK | 1MO | 3MO | YTD | 1YR | 3YR | 5YR | |
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 |
S&P 500 | 1.66 | 3.49 | 4.42 | 22.38 | 33.53 | 20.26 | 18.41 |
Japan Topix | -1.07 | -1.34 | 5.91 | 13.01 | 26.09 | 8.17 | 10.39 |
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.
ECONOMICS | ||
Latest | Consensus Forecast | |
UK GDP (QoQ) | 5.5 | – |
UK PMI | 56.8 | – |
UK CPI (YoY) | 3.1 | – |
EU GDP (QoQ) | 2.1 | 2.1 |
EU PMI | 54.3 | – |
EU CPI (YoY) | 3.4 | – |
US GDP (QoQ) | 6.7 | 2.8 |
US PMI | 61.9 | 61.3 |
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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