Quarterly Update: JUNE 2021
Global equity markets continue to print positive quarters off the back of the global recovery taking place, as well as central banks reaffirming their willingness to support markets. Vaccination rates within developed countries have also increased tremendously across the first half of the year. This has helped buoy confidence in the markets as fear of further lockdowns dissipates. Many developing countries are still grappling with the virus as their vaccine rollout lags that of the developed world.
The United States led the way with an 8.3% rise in their equity markets during the quarter. In contrast with the last quarter, Australia was the second-best performing market with a 7.1% increase, followed by Europe (5.3%) and Emerging Markets (4.3%), all priced in Australian Dollars. Equity markets have so far shrugged off the hawkish tone of the Federal Reserve in their last meeting, as they prepare the markets for earlier than expected rate rises. Global markets have also so far looked through the impact of the more infectious Delta variant that is becoming the prevalent form of Coronavirus across the world.
The sectors within the Australian market that outperformed the overall ASX 200 were technology, healthcare, real estate, and consumer discretionary.
Financials, consumer staples and energy underperformed during the same period. These sector movements suggest the revival of the growth factor as a driver of outperformance during the quarter. Falling interest rates and belief of “transitory” inflation were key factors in these equity market movements that hurt value stocks such as financials and energy.
This is a change in tune of the market compared to the first quarter of 2021, where the value factor had been outperforming growth convincingly due to the pricing in of a sharp recovery occurring in the economically sensitive sectors of the market.