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Monthly Market Snapshot: August 2021

A monthly update on equity, fixed income, currency, and commodity markets.

Views expressed are those of the authors and are subject to change. Other teams may hold different views and make different investment decisions. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional or institutional investors only.

Equities

Global equities (+2.7%) advanced for the seventh consecutive month, ending August with a 17.5% gain year to date. Markets continued to be bolstered by economic reopening and significant fiscal and monetary support, despite moderating economic growth, risks of more sustainable inflation pressures, and uncertainty about the pandemic’s trajectory and economic impact. Mounting inflation forced many emerging markets countries to raise interest rates and increased the prospect that other central banks will need to begin curbing their ultra-accommodative monetary policies earlier than expected. In Asia, the spread of the Delta COVID-19 variant shuttered factories and snarled traffic at several major ports, exacerbating supply-chain disruptions and driving shipping costs and goods prices even higher. Research showed that the authorized vaccines offer effective protection against COVID-19 for at least six months, leading many countries to begin discussions about booster programs to deliver additional doses to populations. China unveiled a five-year plan setting out a framework for stricter regulatory control over the economy and enhanced powers for law enforcement. The government vowed to strengthen legislation to tackle monopolies and tighten controls in areas of strategic importance, including national security, technology, culture, and education.

US

US equities (+3.0%) advanced for the seventh straight month. Despite concerns about the durability of the rally, markets were buoyed by robust corporate earnings, accelerating share buybacks, and still-accommodative monetary policy. COVID-19 hospitalizations eclipsed 100,000 for the first time since January, as cases surged across the US, particularly among unvaccinated populations. The Senate voted to approve a US$1 trillion bipartisan infrastructure bill which includes US$550 billion of new spending over five years, advancing the bill to the House of Representatives, where it faces a more difficult road to passage. Progressive members of the Democratic Party are reluctant to support the bill unless it accompanies a much larger US$3.5 trillion spending bill, which Democrats aim to pass on a partisan basis through a budget reconciliation process. President Joe Biden faced the biggest crisis of his presidency after the Taliban seized control of Afghanistan following his decision to withdraw all US troops from the country.

With 98% of companies in the S&P 500 Index having reported second-quarter earnings, 88% of those companies reported earnings that exceeded forecasts by an average of 15.9%. The estimated year-over-year earnings growth rate for the index in the second quarter was…

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