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MONTHLY UPDATE

June 2021

 

We have reached the half-year mark!

As we enter the second half of 2021, economic re-openings remain well underway across many developed market regions. At the same time emerging market economies across Asia, Africa and South America continue to grapple with Covid-19 as most of their populations remain unvaccinated.

For developed markets, as Covid-19 slowly becomes a rear view mirror risk, the consumer has emerged in a stronger position than many of us would have anticipated as we entered lockdowns early in 2020. A strong contributing factor to this has been the unprecedented scale of monetary and fiscal stimulus, supporting the consumer and underpinning financial markets. Against this backdrop, inflationary pressures are rising.

Whether inflation is to be transitory or permanent is a key market debate, with the U.S. Federal Reserve continuing to suggest that the current rise in inflation is transitory despite the Federal Open Market Committee (FOMC) indicating less inflation tolerance than the market expected at its June meeting.

Macroeconomic factors to consider as we enter the second half of the year include: (1) inflation fears, (2) market stimulus, (3) the U.S. dollar, (4) rising taxes, (5) market valuations, (6) vaccine rollouts, (7) the commodities “super-cycle”, and (8) ESG investing. Please refer the “Monthly Insights” section where we unpack these themes in more detail.

Recognising the above market dynamics, we maintain our stance of a measured approach across all our strategies whilst remaining constructive on risk assets.