After a dip in June, new Covid cases rose globally during July. Encouragingly, countries with higher vaccination rates have generally seen fewer people admitted to hospitals than during previous waves. This has meant that, despite higher cases, the easing of restrictions has continued, particularly in countries further along with their vaccine rollouts, such as the UK.
June’s data (released in July) showed continued positive momentum in the global growth rate –a measure of how the world’s economies are expanding. Data shows that the manufacturing industry has remained robust, although the UK’s economic growth slowed marginally as the ‘pingdemic’ hit. The global service sector also continued to grow at a strong rate, although this pace began to slow for the first time since January. This change of pace has been somewhat expected after the US experienced particularly strong growth which can’t continue to accelerate forever so has started to slow towards a more ‘normal’ level.
UK consumer confidence returned to its February 2020 (pre-Covid) high, and while there was a small dip in Eurozone consumer confidence, it remains strong and above pre-covid levels. US consumer confidence reflects some concern around what to expect from inflation moving forward. However, consumer spending continues to reflect strong above-trend year-on-year growth rates in the UK (9.7%) and USA (18.0%) in June, and the Eurozone for May (9.0%).
To continue the positive news, US employment data showed 850,000 jobs were added in June. This was above economists’ expectations of 720,000 and the strongest increase seen since August 2020. In the UK, the unemployment claimant count of 5.8% is at its lowest level since April 2020.
In China, regulators announced that they were tightening restrictions on a number of sectors, including for-profit tutoring companies, online finance, e-commerce, and ride-hailing. This saw Emerging Markets shares have their most difficult month since March 2020 (more details below).
On balance, markets were largely positive. The combination of continued economic recovery and healthy vaccine rollout progress provided governments with enough confidence to ease restrictions. This said the continued spread of the Delta variant has had an impact on investors attitudes somewhat. Emerging Markets (EM) and Asia Pacific excluding Japan (APxJ) shares fell after Chinese regulators increased their attention on the sectors we mentioned above.
The FTSE-250 (2.56%), US (+2.27%) and Europe (+1.97%) all performed well, while Japan (-2.38%), APxJ (-6.84%) and EM (-7.04%) fell. The FTSE-100 (-0.17%) moved slightly lower, as concern about the spike in cases raised concerns, although this was somewhat softened by the data showing how hospitalisations have remained low compared to previous waves.
The performance of foreign currency generally had a negative impact on Plan performance. We saw sterling rise in value against the US dollar and the euro. However, the Japanese yen rose against sterling which meant that the decline in Japanese share performance was marginally dampened.
The pound rose against the euro (+0.42%), the US dollar (+0.53%) and fell against the Japanese yen (-0.74%). The UK sterling’s strength was mainly driven by concern among the committee who set the Bank of England interest rate, as if inflation gathers momentum, interest rates might need to rise sooner than previously expected.
Investment type performance breakdown
Shares moved lower in July (-0.51%), as the decline in Emerging Markets, Asia Pacific ex-Japan and Japanese shares offset the gains in other markets. The property sector continued its recent strong recovery (+3.41%) and bond prices also increased marginally (+0.47%) in July, after market concerns about inflation faded somewhat.
Summary with Plan details
Overall, our Plan performance was mixed in July. Our Investment Plans with a higher proportion of shares and property, such as our Adventurous Investment Style, saw a decline in performance throughout the month. On the other hand, our Plans with greater exposure to bonds, such as our Cautious Investment Style, saw an improvement as the growth in bonds and property offset the decline in shares.
Our Investment Team continue to actively monitor the financial markets and their impact on your Plan, and as always, we are ready to act in your best interests to events as they unfold.
Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
- Data from Bloomberg