GTC Trendline – Second Quarter 2021
Overview
Global equity markets outperformed the local equity market over the quarter despite the strong rally in financials which provided a positive return of 8.1%.
Local resources pulled back sharply over the quarter declining 5.2% as investors banked profits to digest the impact of Chinese regulations.
The local property market continued its recovery increasing 12% over the quarter. The outlook remains volatile amid the uncertain shift in demand, as we enter the post-pandemic world. The MSCI Developed World Index outperformed its Emerging Market counterpart by 7.7% vs 5.1% in dollar terms over
the quarter.
The weaker dollar and relatively lower US interest rates remained supportive of a stronger rand over the quarter. The rand lost some ground towards the end of June after the FED indicated a possible interest rate hike in 2023, sooner than previously announced.
Global inflation rose amid higher fuel prices and increased demand, as many economies reopen. Rising inflation was to be expected given the low base from which most nations were operating. The unexpected degree – and potential structural shift driving high inflation – has raised concerns.
Investors feared the FED’s reaction to a potential overheating economy as the US CPI increased to 5% and equity markets remained volatile. Interest rates remained unchanged, inflation – while elevated – will likely moderate in 2022, supporting the belief that inflation is transitory.
