Key global market trends – higher rates take their toll

Global equities suffered a setback in September as a rebound in bond yields dragged down still lofty price-to-earnings valuations. The key market development in the month was a more hawkish than expected Federal Reserve policy meeting, which suggested a tapering in bond purchases would be announced next month and U.S.

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Last week’s U.S. Federal Reserve policy meeting suggested the world’s most important central bank was inching closer to tightening monetary conditions. This note considers the potential impact on bond yields and equity markets.
The Fed turns a little hawkish
The upshot of last week’s Fed policy meeting was that it signalled a likely tapering of bond purchases following the November policy meeting (which has long been my preferred timetable).

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Global equities supported by interest rates and solid earnings

Global equities rose 2.6% in August, and the outlook remains encouraging.

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Global markets – low yields supporting equities

Global equities pushed higher in July, and the outlook remains encouraging.
Despite a renewed wave of global COVID cases, rising vaccination rates have meant even fewer are ending up in hospital or dying – allowing major economies such as the United States and Europe to avoid a return to lockdowns.

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It’s official.  As announced on 19 July, the United States National Bureau of Economic Research (NBER) determined that last year’s US recession* ended in April – or only two months after it began!
As seen in the chart below, that means last year’s recession was officially the shortest in US history. 

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By global standards, Australia has so far managed to contain the COVID outbreak fairly well. Given that debate still rages over whether rolling lockdowns and border closures have been justified on a cost-benefit analysis, I though it might be useful to at least gauge what we have potentially achieved by our containment efforts to date.

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Global market trends – stay bullish
An apparent easing of inflation concerns and central bank tightening fears were the major market drivers in June, along with continued progress in the global vaccine rollout and reduction in COVID-related restrictions.
As a result, the global equity rally continued, with the MSCI All-Country World Equity Index returning 2.2% in local currency terms,

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With global growth benefiting from the vaccine rollout and re-opening of shuttered parts of the economy, so-called ‘value’ investment exposures have been performing, and could continue to perform, relatively well. This note outlines three potentially attractive global value opportunities from the suite of BetaShares funds.

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Major global market trends
The global equity rally continued in May, with the MSCI All-Country World Equity Index returning 1.1% in local currency terms, to be up 38.4% over the year. Global bond yields and the $US eased back further, while commodity prices continued to rise.
All up, investors appeared to be backing the view that inflationary pressures would prove temporary and not cause major central banks to bring forward policy tightening.

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Last year, we looked at some interesting data for total ASX ETF net flows across asset classes. In case you missed it, you can see the post here.
Given the positive feedback we received on the article, we thought we would provide an update on the top asset class flows of 2021 so far.

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