Global equity markets rose almost 3% in August after holding relatively steady in July. US markets led the rally (+3,14% in EUR), followed by emerging markets (+2,8% in EUR), while their European counterparts gained 1,7%.
Overall, economic data fluctuated at high levels, despite a slowdown indicating that the peak in terms of growth expectations is already behind us.
On the pandemic front, the Delta variant continued to spread and the number of COVID-19 infection cases worldwide has increased. That said, serious cases and hospitalizations were still contained in Europe, but accelerated in the US due to the stagnating vaccination campaign. With infections on the rise, the need for booster shots is being discussed in a bid to strengthen immunity.
At this stage, the new wave of infections does not appear to be derailing the global economy, still on track to achieve growth above its long-term average. This is backed by US economic indicators, which were firmly in the black: manufacturing and services continued to improve and unemployment to decline despite disappointing job creation data for August (235.000 jobs created vs. 730.000 estimated by economists). It should be noted, however, that these figures had significantly surprised on the upside when they neared one million in June and July.
In addition, the US Fed Chairman delivered his long-awaited speech at the Jackson Hole symposium. The broad strokes were as expected: current inflation can be attributed to temporary factors and job market progress will soon allow the Fed to begin tapering its asset purchases.
Finally, volatility was very present in emerging markets as the Chinese government implemented a number of anti-market regulatory measures. This did not prevent the market from ending the month in positive territory, however. This rebound suggests that the long-term investment horizon in China and emerging markets should not be called into question immediately, given their inherent economic potential.
In short, in this persistently encouraging economic environment, we are keeping a constructive view on equities, which are still more attractive than bonds. We are also reiterating our sector positioning: we want to maintain a balance between cyclical stocks, benefiting from the ongoing economic recovery, and growth stocks, which have restored their performance in recent months.
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