20 Sep Monthly Commentary: June 2021
The global equity rally continued in May, with the MSCI All-Country World Equity Index returning 1.1% in local currency terms, to be up 38.4% over the year. Global bond yields and the $US eased back further, while commodity prices continued to rise.
All up, investors appeared to be backing the view that inflationary pressures would prove temporary and not cause major central banks to bring forward policy tightening. This remains consistent with our view, with ongoing strength in corporate earnings and relatively contained bond yields likely to remain supportive of equities markets over the remainder of this year.
Relative to their 10-month moving average, the trend in equities – though also bond yields and commodity prices – remains to the upside, while the trend in the $US is still down.
Major global equity trends
Global value reasserted its outperformance over growth in the month – after slipping back in April. This shift back to value was reflected in relatively strong performances by financials and energy over the technology and consumer discretionary sectors – as well as strength in European and Australian equities over those of the United States.
Overall, value over growth remains a relatively consistent trend since late last year. Among major regions, trend outperformance by emerging markets has waned in recent months, while that of the United States has tended to strengthen again. Australia continues to generally underperform, though the degree of underperformance has slowed in recent months.
Our base case is that value areas of the global market can continue to outperform over at least the next three to six months, though the ‘reflation/re-opening’ trade should then give way to a reassertion of the pre-COVID relative outperformance of growth sectors such as technology. Technology/growth may be challenged again once bond yields start to re-normalise and/or if inflation picks up more than we expect.
This article was originally produced by David Bassanese from BetaShares you can read the full article here.
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