Points of View

After many months of back-to-back gains, global stock markets faltered in September and ended the third quarter on a slightly down note, marking a pause in the remarkable rally since the COVID lows 18 months ago. The lull may be ascribed generally to the pandemic. Renewed lockdowns caused by the Delta variant this summer forced factories in many countries to keep workers home and cut back production, even as demand for goods swelled. Meanwhile, shortages of raw materials and labor tangled supply chains, throwing global trade into disarray and exposing the vulnerability of just-in- time inventory management.

The global economy is experiencing one of the strongest synchronized expansions since the 1980’s as vaccination campaigns reach a growing percentage of the population, governments ease COVID mobility restrictions, and demand for goods and services surges. This has been especially true in the US, which posted an annualized growth rate of 6.4% in the first quarter.

The first quarter of 2021 was marked by a sea change in financial markets around the world. Equities continued to power higher on the back of a recovering global economy, and the MSCI All-Country World Index gained +4.57%. Conversely, improving growth expectations contributed to a significant increase in interest rates, pushing the broad bond market down by over 3%.

2020 was a year of loss, upheaval, and adaptation with few parallels in recent history. For investors, it was a year of radical uncertainty and extreme volatility, including the steepest market decline and the swiftest recovery ever, a global economic shutdown, and monetary and fiscal stimulus programs that dwarfed all precedents. In the US, we lost 22 million jobs and regained 12 million, impeached one president, elected his successor, and marched by the millions to protest racism and police violence.

Despite 2020’s volatile mix of ingredients, the third quarter was a period of relative calm for investors.

The COVID-19 pandemic has delivered a historic shock from which the global economy continues to reel.

The market convulsions of the past two months have been unusual by any standard. Only twice before, in 1929 and 1987, have investors experienced comparable volatility.

Global financial markets enjoyed an exceptionally strong year in 2019, with positive returns from every asset class.

Stock markets were mixed in the third quarter, with US equities up slightly and international stocks losing ground.

The current US economic expansion is now 120 months old, vying with the 1991-2001 period as the longest in post-war history. Stock markets recovered from their May sell off and inched higher by the end of June.

Financial markets rallied sharply in the first quarter of 2019, despite signs of slowing global growth. Investors responded positively to signals from the US Federal Reserve Bank that the incremental rate hikes of the past several years may be coming to an end, and that going forward monetary policy is likely to be more neutral, and therefore supportive of markets and the economy.