Market Commentary – October 2021

 

GLOBAL MARKETS

Possible contagion from China rattles global markets. US equity markets weakened on talks of tapering the record $28.8tn debt and sooner than expected rate rises.

US MARKETS

Fell sharply on monentary policy fears

US equities fell sharply on monetary policy tightening fears. For the Fed, who has the dual goals of stable pricing and maximum employment, dealing with high inflation and high unemployment highlights the possibility of a policy error. US jobless claims rose for the third straight week, and the US government cut the extra, Covid-related, unemployment benefit of $300pw earlier than planned. The economy added 235k jobs in August – the lowest in 7 months.

Down 4.7% (US 500)

 EUROPEAN MARKETS

Energy concerns creating Headwinds

The pan-European Stoxx 600 index fell on slowing global growth and, in part due to, the energy crisis. Russian constraints on gas supply are helping to create a supply crunch in Europe. A combination of rising consumer energy costs, particularly in Italy & France, and supply chain disruptions, specifically in microchips, are creating economic headwinds. Manufacturing and Services PMI have both dipped in September to 58.6 and 56.0 respectively but both input and output costs are on the rise.

Down 3.4% (Euro 600 Index)

 UK MARKETS

Supply chain disruptions impacting markets

Markets were weak as supply chain disruptions led to chip shortages, and a brewing energy crisis fanned investor concerns. Strong performances from BP and Shell were not enough to offset a weakness in mid-caps, in particular travel stocks. The Bank of England governor, Andrew Bailey, alluded to earlier-than-planned rate rises, with CPI running at a 3.2% annual rate compared to a target of 2.0%. A number of smaller UK energy supply companies collapsed, unable to keep up with rocketing wholesale energy prices.

Down 1,2% (UK All Share)

ASIAN MARKETS

Property developer unnerves markets

China unnerved global markets as its largest property developer, Evergrande, looked set to default on payments, after missing some of the $47.5mn coupon payments from a 2024 bond. Fears of contagion into China’s financial markets pushed the MSCI Asia ex-Japan index down. Japanese market rose, buoyed by the optimism surrounding the new PM, Fumido Kishida, who will take office in October. Markets expect the new PM to recruit a young cabinet with more women in senior roles.

Down 3.4% (Asia 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.

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

  • Commodities rallied; US natural gas price hit at a 7-year high of $5.9 per million British thermal units and brent crude rose near 2018 levels to U$79/bbl
  • Global markets were unnerved by China’s Evergrande, fearing a spread into other financial markets
  • US Equities dragged down by concerns over QE tapering and inflation
  • Japan equity markets delivered strong returns as optimism returned to the region
  • UK markets suffered with fears of fuel and food shortages and rising prices

 

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 weak against most major currencies as UK gas prices reached record highs
  • The ‘safe haven’ dollar was strong against Sterling, Euro and Yen
  • The dollar index rose to a year-high supported by the rise in yields
  • The US dollar was also strong against the Japanese Yen rising above the JPY111 resistance level

 

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

  • Most credit sectors posted negative returns as markets look for the support of zero or negative interest rates and loose monetary policy.
  • US yields were up more than other major economies’, reaching a 3-month high, due to expectations of earlier than expected Fed tapering and rate rises coming into view.
  • UK Gilt markets fared worse than US Treasuries due to negative news on inflation and slowing economic growth.
  • High yield bonds performed the best as they continue to benefit from the hunt for yield.

 

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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