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The week in review

In a review of the week of 19 July, we flag the new developments in financial markets, which continued to be dominated by the same reoccurring themes of inflation, central banks’ intervention and the spread of the COVID-19 Delta variant.
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Published 26 July
2 mins

What’s happened in markets?

KEY MARKET MOVEMENTS (% change)
 1WK1MO3MOYTD1YR3YR5YR
FTSE All Share0.58-0.182.1611.4720.572.115.78
Euro Stoxx 501.901.013.8218.0424.869.1410.10
S&P 5001.974.115.9118.4038.4518.4017.39
Japan Topix-2.990.360.986.6922.935.399.74
MSCI Asia Pac.-2.19-3.05-3.581.7023.6510.9212.74
MSCI Emerg. Mkts.-2.08-3.20-2.252.8224.239.8111.40
Jo’burg All Shares2.343.501.3816.3924.679.858.47
UK Gov’t Bonds1.113.062.94-3.29-4.043.782.42
US Gov’t Bonds0.191.321.85-1.52-2.915.202.43
Global Corp. Bonds0.251.312.410.072.267.054.69
Emerg. Mkt. Local-0.36-0.82-0.04-4.342.594.233.33

Figures in the respective local currencies as at the end of trading on 23/7/2021.

The debate on inflation continued to dominate news headlines as investors remain divided between those who buy into the view of central banks (and the Federal Reserve/Fed) in particular) that the price increases are mainly one-offs versus those who believe the spikes shown in consumer price indices are likely to continue.
And while the Fed has been consistent in its message, the burgeoning clammer of those objecting to its view led to Joe Biden seeking to assuage concerns as he stood in front of Congress. While he admitted the higher food and fuel prices were hurting consumers, he reiterated the temporary nature of these increases at a time when the US government could inject even further cash into the economy due to the bipartisan US$1.2 trillion infrastructure deal, as well as the larger US$3.5 trillion social spending package.
But why is this important? If the central banks act too soon, and undertake a U-turn with regard to their market intervention, they could stem the rate of growth, which may prove to be more fragile than many hope. Get it wrong, however, and inflation could lead to rapid growth in services prices and wages – costs that may prove difficult to curtail.
As such, recent data in the US highlights the delicate balance authorities need to achieve. While the flash purchasing managers’ index (PMI) numbers from IHS Markit for the US were good at 59.7, and significantly above the level of 50 that denotes expansion in an economy, they came in at a four-month low and down from June’s 63.7.
In Europe, meanwhile, Germany posted very positive flash PMI numbers of 62.5 in July – up from June’s 60.1 and the highest for nearly a quarter of a century. This encouraged investors to believe that the bloc can break from the sluggish growth pattern it has seen over the past few years.
In markets, over the past 30 days, developed markets (+2%) outperformed emerging markets (-2%) as investors remain concerned about limits to economic growth as COVID-19 cases climb in some countries. Style-wise, growth stocks (+3%) retained a lead over value (0%) during the same 30-day period. The week saw information technology (+5%) continue its growth trajectory – as it has over the last year (+45%) – while other sectors also posted positive numbers, apart from financials (-1%) and energy (-9%), which took a beating due to new lockdowns being imposed around the world and the OPEC+ deal, which saw an agreement to increase production. Large capitalisation stocks rose +1% over the past 30 days versus the -2% drop for small capitalisation stocks.
ECONOMICS  
 Latest

Consensus

Forecast

UK GDP (QoQ)-1.6
UK PMI57.7
UK CPI (YoY)2.5
EU GDP (QoQ)-0.31.5
EU PMI60.6
EU CPI (YoY)1.9
US GDP (QoQ)6.48.5
US PMI60.161.0
US CPI (YoY)5.4

What’s happened in portfolios?

While we saw similar performance across investment styles as we have in previous weeks, we remain pleased with the performance of our funds, which remain balanced against a backdrop that could change and swing back to value stocks outperforming once again.
In fixed income, the story continued where longer dated bonds did better than shorter maturities, and higher quality/investment grade corporate paper performed better than high yield. However, again, this too could change, which supports our balanced approach.
And, the growth of our UK property portfolio continued on the back of pent up demand, which is visibly helping to fill the underlying commercial property outlets with consumers at a time when the supply of space remains limited. The scenario is providing nice tailwinds for investors.

What's happening this week?

29 Jul • EU Consumer Confidence | 29 Jul • UK Mortgage Approvals | 30 Jul • Q2 Flash Gross Domestic Product

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we manage clients’ investments, please contact us on the same number as above. Or you can get in touch using the links to the forms towards the end of this page.

Sources: Nedbank Private Wealth and (1) Bloomberg; and (2) Reuters.

The value of investments can fall, as well as rise, and you might not get back the original amount invested. Exchange rate changes affect the value of investments. Past performance is not necessarily a guide to future returns. Any individual investment or security mentioned may be included in clients’ portfolios and is referenced for illustrative purposes only, not as a recommendation, not least as it may not be suitable. You should always seek professional advice before making any investment decisions.

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