What’s happened in markets?

KEY MARKET MOVEMENTS (% change)
1WK 1MO 3MO YTD 1YR 3YR 5YR
FTSE All Share 0.66 2.97 6.79 12.44 24.71 2.02 7.67
Euro Stoxx 50 0.91 4.92 8.92 18.29 35.12 8.99 10.67
S&P 500 0.43 2.46 8.21 13.83 43.71 17.28 17.38
Japan Topix -0.26 2.53 2.49 9.35 25.65 5.47 10.45
MSCI Asia Pac. 0.16 3.73 0.36 6.43 41.87 9.89 15.05
MSCI Emerg. Mkts. 0.08 4.23 2.38 7.80 42.38 9.56 13.92
Jo’burg All Shares -0.13 0.75 -0.66 15.65 30.45 8.68 8.28
UK Gov’t Bonds 0.91 1.51 0.42 -5.73 -6.77 3.49 2.73
US Gov’t Bonds 0.48 1.03 0.90 -2.61 -3.19 4.88 2.35
Global Corp. Bonds 0.66 1.45 1.83 -1.17 4.07 6.80 4.80
Emerg. Mkt. Local Currency Bonds 0.31 1.50 3.38 -1.75 6.39 4.66 4.34

Figures in the respective local currencies as at the end of trading on 11/6/2021.

The G7 summit in Cornwall dominated news towards the end of the week, as world leaders sought to confirm that economic support would continue despite the mounting costs. Tensions remain between the EU and UK over Northern Ireland in what has been termed “sausage wars” by UK newspapers, given the restrictions mean chilled meat products cannot be transported from the mainland to Northern Ireland, with the EU threatening to impose sanctions on the UK should Boris Johnson choose to ignore parts of the Brexit agreement.In other UK news, “Freedom Day” has been postponed to 19 July, with further delays not ruled out, as the delta variant (first detected in India) is showing to be at least 40% more infectious than the alpha strain (first detected in the UK). This pushback could threaten the pace of the recovery in the local economy, which posted an expansion of gross domestic product of 2.3% in April, its fastest pace since the coronavirus reopening last summer, on the back of strong consumer spending, while the resumption of full schooling boosted output.

In other UK news, “Freedom Day” has been postponed to 19 July, with further delays not ruled out, as the delta variant (first detected in India) is showing to be at least 40% more infectious than the alpha strain (first detected in the UK). This pushback could threaten the pace of the recovery in the local economy, which posted an expansion of gross domestic product of 2.3% in April, its fastest pace since the coronavirus reopening last summer, on the back of strong consumer spending, while the resumption of full schooling boosted output.

In the US, the consumer price index rose by 5% in May, higher than the 4.7% expected and the 4.2% recorded in April. The increase marked the biggest jump in the index since August 2008. However, markets did not react as had been expected. Although there was a slight increase in yields, these then fell. This has been attributed to the Federal Reserve (Fed) managing fears of inflation, although some investors have yet to be convinced that inflation will only be transitory in nature.

In the Eurozone, the European Central Bank kept rate increases on hold and pledged to continue to maintain the pandemic emergency purchase programme, despite the central bank raising its growth and inflation forecasts. The bloc will also have to manage its members with regard to the pledge agreed at the G7 of a minimum global corporation tax of 15%, with Hungary and Poland having already stated they are against the introduction.

In Asia, the spread of Taiwan’s COVID-19 outbreak to electronic factories threatens to put even more pressure on the struggling semiconductor industry, with delays expected to continue for at least another year. Over the Strait, China’s producer price index increased 9% in May, which was an increase on the 6.8% gain in April.

In markets, emerging markets (+5%) performed in line with developed markets (+5%) over the past 30 days. Style-wise, growth stocks (+7%) re-established a lead over value (+3%) versus the same period 30 days prior, with real estate (+9%), information technology (+8%), communication services (+5%) and consumer discretionary (+5%) leading the charge. Small capitalisation stocks posted +7% returns for the past 30 days versus the +5% for large capitalisation stocks.

ECONOMICS
Latest Consensus Forecast
UK GDP (QoQ) -1.5  –
UK PMI 62.9  –
UK CPI (YoY) 1.5 1.8
EU GDP (QoQ) -0.3  –
EU PMI 57  –
EU CPI (YoY) 2.0 2.0
US GDP (QoQ) 6.4 6.4
US PMI 64.0  –
US CPI (YoY) 5.0  –

What’s happened in portfolios?

Our property positions continued to benefit from the increasing retail activity and, again in the UK, despite the delays to lockdowns easing, growth in confidence, which should be confirmed in the next set of retail sales numbers.

On the fixed income front, despite the recent market movements, we continue to believe that the focus for bond portfolios should be on short-term debt. The recent shift in portfolios to further tilt to these positions allows us to mitigate duration risk for very little reduction in yield.

What’s happening this week?

16 Jun • Fed Interest Rate Decision | 17 Jun • EU Consumer Price Index | 18 Jun • UK Retail Sales