Market Update

August 10, 2021

  • The U.S. economy is growing at its fastest pace in over 30 years, following the sharpest global recession since the Great Depression last year. Growth forecasts for the U.S. were again revised upward, with the IMF and U.S. Fed updating their 2021 forecasts to +7.0%. 

  • As global manufacturing and retail sales rose sharply, consensus forecasts also increased: +6.0% for global growth, +5.3% for developed economies and +6.6% for emerging markets. 

  • Consumer spending accelerated during the quarter, with U.S. consumer confidence soaring to its highest level since the pandemic began and unemployment declining to 5.9%. 

  • June’s +5.4% inflation rate (annualized) was the largest 12-month increase since August 2008. The “base effect” of last year’s depressed prices, in combination with higher prices resulting from low inventories and above average “post-pandemic” demand, is the primary reason for the spike in inflation. Gasoline also increased 45% as travel returns to more normal levels. Despite higher recent inflation, average five-year forward expected inflation is +2.5%. 

  • As anticipated, major central banks signaled their intentions to maintain accommodative policies to support global growth, rather than risk derailing global recovery with early tightening. 

Do we anticipate market volatility due to rising concern regarding the Covid delta variant? 

The rapid spread of the delta variant has led to parts of the world reintroducing restrictions, particularly in countries with low vaccination rates. So far, countries with high vaccination rates have seen less economic disruption due to the delta variant as the vaccines have shown to be largely effective in preventing serious illness. While market volatility has so far remained subdued, the various Covid variants could still disrupt economic growth and market conditions. That’s why we structure our portfolios to both protect capital when market volatility increases and grow when market conditions are healthy. 

If you have any questions regarding our market outlook or investment performance, call us at 214.978.3300.