What’s happened in markets?

FTSE All Share 0.58 -0.18 2.16 11.47 20.57 2.11 5.78
Euro Stoxx 50 1.90 1.01 3.82 18.04 24.86 9.14 10.10
S&P 500 1.97 4.11 5.91 18.40 38.45 18.40 17.39
Japan Topix -2.99 0.36 0.98 6.69 22.93 5.39 9.74
MSCI Asia Pac. -2.19 -3.05 -3.58 1.70 23.65 10.92 12.74
MSCI Emerg. Mkts. -2.08 -3.20 -2.25 2.82 24.23 9.81 11.40
Jo’burg All Shares 2.34 3.50 1.38 16.39 24.67 9.85 8.47
UK Gov’t Bonds 1.11 3.06 2.94 -3.29 -4.04 3.78 2.42
US Gov’t Bonds 0.19 1.32 1.85 -1.52 -2.91 5.20 2.43
Global Corp. Bonds 0.25 1.31 2.41 0.07 2.26 7.05 4.69
Emerg. Mkt. Local -0.36 -0.82 -0.04 -4.34 2.59 4.23 3.33

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.

Latest Consensus Forecast
UK GDP (QoQ) -1.6
UK PMI 57.7
UK CPI (YoY) 2.5
EU GDP (QoQ) -0.3 1.5
EU PMI 60.6
EU CPI (YoY) 1.9
US GDP (QoQ) 6.4 8.5
US PMI 60.1 61.0
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