Please find below our Investment Market Update as at 12th November 2021.
Blue Sky Investment Market Update
A big thank you to Andrew, aka Gus, for writing these Market Updates over the last two weeks. Usually when I have any time off, equity prices seem to dip – quite the opposite this time!
Most assets have performed well so far in November and even bonds have recovered lost ground. Among the best performing sectors have been technology, global themes, infrastructure and sustainable real estate. All of which feature heavily across our portfolios.
A look back to October
With the help of JPMorgan’s monthly review, I thought it worthwhile summarising what happened in October, intertwined with some recent sentiment.
Once again this was evident with global equities pulling back circa 5% at one point in the month.
- After a weak start many equity indices made new highs during the course of the month
- US stocks were supported by a strong start to the Q3 earnings season, with more than 80% of companies beating earnings expectations
- Chinese indices also rebounded as the property sector concerns abated
- Fixed income markets were bumpier, held back by continued fears over inflation
- Energy prices soared with gas prices rising by 60% in a week but moderated when Russia said it will increase its gas supplies to Europe
- Inflation remained elevated. In the US, the core Consumer Price Index is at 4%. Euro inflation rose to 3.4%, assisted by German inflation being over 4%
- China’s growth decelerated in Q3, having grown at 7.9% year to year in the 2nd quarter
- On the positive side, China’s exports rose by 28.1% year on year
- The goal of a 6% annualised growth rate for China seems achievable
- Chinese equities rallied strongly, suggesting that after several months of underperformance, greater regulatory uncertainty may be priced in
- In the US, Biden appears to be making progress on his infrastructure proposals
- Like us, the US has labour shortages, with wages increasing by a robust 5.5% year on year
- US GDP grew by 2% year on year in the third quarter, which disappointed markets but more timely data has offered encouragement that momentum is now picking up again. Overall, the US recovery is solid and it appears that the recovery has re-engaged
- Macro wise, economic growth in Europe is still suffering from a loss in momentum. This is most notable in Germany as shortages impact the automobile sector
- However, taking automotives out of the equation, the trajectory of Eurozone industrial production is back above pre-pandemic levels
- UK wise, the unemployment rate fell to 4.5% last month
- Interest rates remain on hold and as we thought, they may not rise as quickly as many predicted
- The FTSE 100 reminds us that it’s not reflective of the UK economy, with the index outperforming small and mid-cap stocks. These have been out of favour since the Brexit vote, but attractive valuations and dividend yields are likely to encourage global investors to return to this market.
- In Asia, improving vaccination rates are enabling economies to gradually reopen with mobility picking up accordingly.
- Surveys around economic sentiment and outlook are showing encouraging results from manufacturers.
I appreciate that I’ve hit you with a lot of data this week, but it is helpful sometimes to take stock of where we are, particularly as equity markets have responded very positively over the last 2-3 weeks.
Towards the end of the month, we will produce a bulletin on COP 26 and the resultant actions agreed. What’s interesting is that this is the 26th Climate Conference and it appears that there has been a lot of conjecture previously without sufficient action. Certainly, the spotlight is burning more brightly on what the commitment is globally. Co-ordinated action is clearly a very difficult ask!
Have a lovely weekend.
Gary Neild and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.