Around the globe, new Covid cases continued to drift lower in June 2021, albeit at a slower pace than the previous month. However, the last fortnight has seen a sharp rise in cases in countries (such as United Kingdom, Spain, Indonesia, Russia, and South Africa) that have most recently been impacted by the Delta variant.
The acceleration of the global vaccine roll-out has resulted in further strides being made towards a more 'normal' pre-Covid world. This has been particularly apparent in Japan, where vaccination rates remain low ahead of the Olympics, which the country is scheduled to host from late July to early August 2021.
Data released in June showed that globally in May, manufacturing data remained robust, although India understandably saw a slowing in activity due to its recent spike in Covid cases.
The service sector saw another firm pick up as restrictions eased further within the European Union. This saw consumer sentiment in the Eurozone rise above its pre-pandemic levels, which, despite a strong recovery, has not yet been the case in the UK and USA. Similarly, consumer spending has continued to rebound well in the Eurozone, coming in at +23.9% year-on-year (YoY) in April. Consumer spending also showed strong YoY gains in the US and UK, up +24.6% and +28.2% in May respectively.
The YoY 13.4% increase in the Nationwide UK house price index is the strongest price increase since the end of 2004. This was driven by buyers continuing to take advantage of the phasing out of the Stamp Duty holiday in England, Wales, and Northern Ireland. The US housing market also showed rapid price increases, with a YoY increase of 14.9% providing the strongest gain since the end of 2005.
US employment data showed 559,000 jobs were added in May, which was below economists’ forecast of 675,000. Economists are suggesting the key drivers preventing even stronger employment data include unemployment benefits packages, the risk of contracting Covid-19, and childcare costs. Despite being below forecasts, this is a marked improvement from April’s employment figures, reflecting the ongoing loosening of business constraints and increasing vaccination rates.
Inflation has been a key market focus in 2021, with some inflation data around the globe coming in stronger than expected. Most notable here has been higher than expected numbers in the US, which caused a brief and transient stir in the market, with the Federal Reserve moving quickly to express its lack of alarm about the growth and inflation outlook. While global central banks continue to monitor the situation, the general view is that inflationary pressures will be temporary in nature.
Markets were mixed as the rise of the Delta variant weighed on market sentiment, although continued momentum of vaccine roll-out programs and the reopening of economies saw developed markets generally perform well. The US (+2.27%), Europe (+1.36%) and Japan (+1.10%) all performed well in June. The FTSE-100 (-0.61%), Asia Pacific excluding Japan (-0.56%) and Emerging Markets (-0.12%) were all marginally down for the month.
However, the performance in foreign currency was boosted in our Plans due to the weakening of sterling against the US dollar and Japanese yen. We go into more detail on this below.
The pound rose against the euro (+0.35%) but weakened against the US dollar (-2.75%) and the Japanese yen (-1.34%). US dollar strength was largely down to the Fed’s messaging from their June meeting, suggesting some policy action may be required to control inflation, which increased investor demand for the US dollar.
Investment type performance breakdown
Shares moved higher in June (+2.42%), which was powered by the momentum of the global economic rebound. The property sector also continued its strong recovery in 2021(+3.84%) and bond prices increased marginally (+0.28%) in June, indicating that markets are not expecting the inflationary pressures to endure.
Overall, our Plans performed well in June. Those Plans with a higher allocation to shares and property, such as our Adventurous Investment Style, saw strong performance throughout the month. Plans that hold more bonds, such as our Cautious Investment Style, would have also seen an improvement as the marginal growth in bonds was supported by the growth seen in shares and property.
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