Affinity Market Commentary – August 2021

 

GLOBAL MARKETS
Inflation weighs on the markets…

US MARKETS
Facing strong headwinds…

The US equity market rebounded from March 2020 low levels and low corporate earnings to stage a massive bull run on strong earnings and a spike in GDP. The economic data coming out of the US is mixed. On the one hand, the jobless numbers were a higher than expected 400,000, and on the other, non-farm payroll numbers were at a ten-month high economy adding 850,000 jobs in June. CPI annual inflation in June was 5.4%; the price rises of used cars, trucks, fuel oil and gasoline the largest contributors but this is seen as transitory by the Fed which is why they kept rates at near zero. Increasing references to slowing down asset purchases is a point of note but for now the stock markets are unphased.
Up 2.4% (US 500)

EUROPEAN MARKETS
Maintain economic momentum…

Eurozone equities continued their ascent in July. Markets were led by the strong performance in IT, Materials and Real Estate. The Eurozone maintains economic recovery momentum after posting a quarterly GDP growth of 2.0% in June. Signs of improvement were seen in a variety of economic data putting the region in a sweet spot. Business activity in July recorded a PMI of 60.6, the fastest rate for 21 years, and CPI inflation was higher than expected at 2.2%. The vaccine roll-out in Spain, Italy and Germany gained pace boosting hopes that no further lockdowns may be necessary.
Up 2.0% (Euro 600 Index)

UK MARKETS
Strengthened pound impacting multinationals….

UK equities rose just slightly in July, but the strength of Sterling against the US Dollar and Euro meant large cap stocks with overseas earnings performed poorly, suppressing the main index. It was a volatile month, and markets sold off in the first part of the month due to the spread of the delta variant spread and the slowing growth outlook. Markets recovered in the second half, buoyed by strong sets of results from the financials, basic materials, and energy sectors. The Office for National Statistics reported the CPI rose by 2.5% in the year to June 2021, once again above Bank of England’s target rate of 2.0%.
Up 0.4% (UK All Share)

JAPANESE MARKETS
Olympics no support to markets…

The Japanese stock market fell in July as authorities struggled to manage the contagion of the Covid delta variant. Daily new confirmed Covid cases rose by 500% in July. Lacklustre inflation and the public anxiety surrounding the Tokyo Olympic games leading to a spread of the virus further reduces Japan’s chances of gaining meaningful traction. The au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) rose to 53.0 in July from 52.4 in June. Supply chain disruptions continue to impact business activity and Covid emergency curbs adversely affect personal consumption levels.
Down -2.2% (Japanese Index)

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

 

 

Key Points
• Global equity markets were volatile as Covid cases climbed and inflation worries continued
• US markets were up on the back of strong quarterly earnings from big tech companies
• Emerging market equities sold off sharply mid-month as China imposed regulatory bans on widely held tech stocks and education companies.
• European Central Bank concluded its strategic review and is keeping an accommodative policy in place to aid recovery.
• Japanese market sentiment was dominated by the alarming rise in Covid
infections, which picked up to reach 10,000 cases per day.

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

Key Points
• Sterling was the top performer in the G10 monthly currency, strengthening 0.75% against the US Dollar and 0.58% against the Euro
• Dollar was weaker in the month as worries of slowing US economic growth and a dovish Fed pushed investors away from the greenback
• Japanese yen strengthened slightly against the US dollar as an alternative safe haven
• Euro was strong against US dollar, on the back of upbeat economic data

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

 

Key Points
• Fixed income rallied as markets fretted about the rise in Covid cases and the more contagious delta variant, pushing investors into safer alternatives away from equities.
• Yields of 10-year government bonds in France and Germany remained in negative territory at -0.10% and -0.46% respectively
• Italy and Greece borrowing costs are c.0.61%, near to UK’s 0.56% which is quite remarkable considering the increased risk here in recent years especially during the financial crisis.
• The ECB announced that it is willing and able to provide further stimulus to support the market causing yields to drop, in some instances to 3-month lows

DISCLAIMER – The value of investments and the income from them can go down as well as up and past performance is not a guide to future performance. Returns are in local currency unless indicated otherwise. Source: Bloomberg.

Disclaimer: The information contained in this report is for illustrative purposes only and should not be construed as a solicitation nor offer, nor recommendation to acquire or dispose of any investment. Specifically, the share class used to create the illustrations may not be available on all platforms nor be suitable for individual investors. This report was produced by Collidr Research (“Collidr”) for Affinity Integrated Wealth Management (AIWM) and while AIWM and Collidr use reasonable efforts to obtain information from sources which they believe to be reliable, neither AIWM nor Collidr make any representation that the information or opinions contained in this report are accurate, reliable or complete. The information and opinions contained in this report are subject to change without notice. Model returns are calculated using the most appropriate share class of the underlying funds, having regard to the illustrative nature of the report, with all income being reinvested. As a result, real portfolio performance may vary from model performance. Where model portfolio histories are shorter than three years, historic model returns are substituted prior to inception date with returns from an Collidr performance benchmark. This benchmark is constructed from the average returns of all Collidr portfolios with similar risk profiles that existed during that time. The value of investments and the income from them can go down as well as up and past performance is not a guide to the future performance. Affinity Integrated Wealth Management is a trading style of Buryfield Grange Limited, Buryfield Grange Life Planning Limited and Affinity Integrated Wealth Management Ltd. ‘Buryfield Grange Limited’ is authorised and regulated by The Financial Conduct Authority. Not all services provided by Buryfield Grange are regulated by the Financial Conduct Authority. ‘Buryfield Grange Limited’ is registered in England and Wales at Inspire House, 20 Tonbridge Road, Maidstone, Kent, ME16 8RT. Company registration number 4568338. Collidr Research is a trading name of Collidr Technologies Limited, registered in England and Wales at 34 Southwark Bridge Road, London, SE1 9EU. Company registration number 09061794. Data Providers: Bloomberg L.P. and Collidr.

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