Markets Steady Ahead of the Jackson Hole Symposium
Financial markets experienced mixed performance over the week, as investors grappled with fresh geopolitical concerns alongside continued uncertainty over policy given the recent pace of global growth. Following last Thursday’s volatile trading session, market sentiment has since recovered, with US and Asia-Pacific stocks recouping most of Thursday’s decline, while European markets continued to make up lost ground in recent sessions. In the US, the Federal Reserve’s virtual Jackson Hole Symposium is now underway, with market participants watching events closely for clues for any indications on future Fed policy as the US economy recovers from the pandemic.
Bringing together some of the brightest minds in the realm of monetary policy, the Jackson Hole Symposium is held annually to discuss common issues and challenges relevant to today’s current market and political climate. Given the increasingly integrated nature of global politics and financial markets, policymakers, finance ministers, and leading financial market players from around the world are invited to the event to contribute their views and discuss future policy. The proceedings are closely followed by financial market participants who are on the lookout for key information that could possibly affect global financial markets in the short, medium, and long-term. Hosted online due to surging Delta variant cases in the state of Wyoming, the main interest of on-lookers this year is the Fed’s timeline of tapering its $120bn per month asset purchase scheme, which is expected to come to an end between 2021 and 2022. Most analysts do not expect the Fed to give any formal taper announcement at this year’s Symposium, with any talk likely to remain ambiguous to allow the Fed to remain flexible as pandemic and data news flows continue to flow. That being said, it is pertinent to note that any surprise announcements could influence financial markets post-event, a scenario we continue to monitor as the event goes on.
In equity markets, US equities remained resilient over the week as concerns about the spreading Delta coronavirus variant abated somewhat, with the seven-day average new case rate steadying at around 150,000. While this led to considerable improvements in equity prices on Friday and Monday, Jerome Powell’s looming speech at the Jackson Hole Symposium has slowed equity market gains, with trading volumes remaining relatively light in recent days. Despite this, US equity markets still reached intraday record highs on Thursday, with the S&P 500 index achieving its 51st record high since 2021 began. Within Europe, equity markets have remained flat or trended downwards through the week on the back of Covid-19 concerns and as economic data releases came in below market expectations (although still positive). Moving to Asia, equity markets ended flat over the period, as the surge of several mispriced equities helped stem last week’s negative performance (following the sell off last Thursday’s trading session). Over the week, improved clarity on the regulatory outlook incentivised some investors to take advantage of discounted valuations, although this momentum has begun to run out of steam as Asian equities began to trade sideways in the last couple of trading sessions.
Following a generally positive performance for non-equity indices in last week’s dataset, non-equity sectors have remained flat overall this week as investors delayed any significant investment decision making until the close of the long-awaited Jackson Hole Symposium. Overcoming this trend is the Index-Linked Gilt sector, which has bounced back strongly this week as the prospect for UK wage inflation has increased overall inflation expectations from their recent low.
Against this backdrop, the OBI portfolios enjoyed a strong week of performance. While more defensive in nature than the other portfolios, OBI 3 and 4 benefitted from their exposure to Europe and multi-asset funds, while OBI 5 to 8 experienced a solid uplift in performance as equity exposure in value assets, clean energy, and UK smaller companies acted as performance drivers over the week. This week’s portfolio performance offsets the marginal losses experienced in the higher risk portfolios from last week, while the lower risk portfolios continued to build upon recent momentum to push the portfolios past their annualised performance targets.
As reiterated last week, market volatility is completely normal, and slight pullbacks like we experienced last week are healthy for financial markets to continue to improve gradually over the longer term. The Jackson Hole Symposium may add some volatility to markets over the week to come, while geopolitical conflict, Germany’s federal election, and the ongoing situation within Afghanistan may provide bumps along the road for financial markets. At this stage, we do not foresee these events altering our long-term outlook, and market fundamentals coupled with macroeconomic conditions remain favourable for the remainder of 2021. We continue to monitor markets closely as we progress through the economic recovery, however looking ahead, our outlook remains very positive.
Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value. You may not get back all of your investment and the final value of your investment will depend on the performance of your portfolio. The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations. Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges and trading spreads. Unless stated, income is reinvested into the portfolio. The information contained in in this document is for information purposes only. It does not constitute advice or a recommendation or an offer or solicitation for investment.
Key Events We Are Watching This Week:
- Thursday 26th: Jackson Hole Symposium.
- Tuesday 31st: European Inflation Rate for August.
This Day in History
On this day in, 1959, British car manufacturers Austin and Morris launched a small family car – the ‘Mini’.
Thank you for reading, have a great week!
Jason, Gina & Ben
