Monthly market blueprint - June 2021

In the US, the main thrust of discussion was around the return of inflation driven by Joe Biden’s stimulus packages. This was apparently confirmed with core (less food and energy) personal consumption expenditure increasing 3.1%, which is considerably higher than the 2% target rate of the US Federal Reserve (Fed). However, Fed officials reiterated their stance that bottlenecks in supply, which are driving prices higher, will prove temporary. US equities ended the month +0.7% higher in USD terms, although this somewhat masks the volatility that we saw.

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In the UK, May began with the release of Q1 GDP figures showing the economy contracted 1.5% in the first three months of 2021. While on the face of it this is poor, markets are forward-looking and the key data points were the vaccine rollout and the reduced number of Covid mortalities, both of which continue to point towards to the removal of Covid restrictions and the strong rebound of the economy in 2021. UK equities moved up +1.1%.

The economic data to come out of Europe was exceptionally positive in May. From a slow start the vaccine rollout has now picked up pace and various sentiment indicators and surveys show high levels of optimism in the economy as the conversation shifts to removing lockdown measures. European equities ended the month higher by +2.6% in local currency terms. Emerging market and Japanese equity markets moved up in line with their global peers.

Despite the inflation debate, both UK and US 10- year bond prices ended the month slightly higher than they started, while the German 10-year Bund ended the month slightly lower, as the European pandemic asset purchase programme and the support it provides to bonds look less tenable given the expectations for economic recovery.

The talk of inflation sent the gold spot price up +7.8%, while the oil price moved up +4.6%. A strong Pound, up almost +3% against the US Dollar in May, moderated the gains seen in non-GBP assets for Sterling investors.

Read more detail by downloading our full update below.

The economy and your investments webinar

Additionally, in our June 'The economy and your investments' webinar, our Chief Investment Officer and Chief Economist will examine the landscape for investors and answer the big questions which are on everyone’s minds.  Register here.

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