Monthly review and outlook - July 2021

  • 03 August 2021
  • 5 mins reading time


In June, the increased pace of the vaccine roll out throughout Europe was sustained, and restrictions were further loosened. Continued government spending measures offset concerns about rising inflation.

Global equity prices were higher than in May, with the exception of the UK, and US equities reached a new all-time high. This was driven by signs of accelerating economic growth.

Emerging market equities broadly rose, but a rising US dollar provided some resistance, as local currencies weakened.


UK equities struggled in June, although larger companies performed well supported by weaker sterling. Energy delivered a strong performance, as did the healthcare and consumer staples industries, such as food and beverage. These are products that tend to perform well regardless of the economic situation.

More economically sensitive areas of the market, like banks and insurance companies, reversed some of their recent strong gains due to concerns over the rising cases of the “Delta” variant of Covid-19. Retailers and the travel/leisure sectors also performed poorly as the UK government delayed the date to further lift social distancing laws.

On the other hand, US equities reached a new all-time high. The Federal Open Market Committee meeting indicated that policymakers are beginning to think about tapering their asset buying programme, and that interest rate rises could come in 2023. However, later in the month, officials signalled that high hurdles remain before policy is tightened by raising the federal funds rate.

In Europe, share prices rose, with the information technology sector one of the strongest performers. The healthcare sector was also strong while financials and utilities weakened. Indicators of economic activity remained robust.

Elsewhere in the world, performance was mixed. Equities declined in Japan as a resurgence in Covid-19 infections and lockdowns weakened sentiment. Pakistan was the weakest index market. The Philippines saw the best-performance, while Taiwan and South Korea also ended the month positively. China achieved a modestly positive performance over the month.


The demand for and prices of US Treasury bonds fell due to the Federal Reserve (US Central Bank) indicating that it might reduce its stimulus measures for the economy. European and UK government bonds performed similarly.

In contrast, the demand for and prices of corporate bonds performed well. Lower risk-rated corporate bonds benefited from declining yields, while high yield remained supported by continued economic recovery.


Energy was the best-performing commodity in June with crude oil and natural gas rising as a result of the economy reopening. In contrast to the month before, the price of precious metals dropped, with gold and silver both lower than in May. Aluminium and lead gained as the prospects for manufacturing continue to improve.


We expect the Federal Reserve to start to reduce its financial stimulus programme later this year.

For equities, we continue to believe that a strong profits outlook will offset the impact of higher yields. We’ve maintained our preference for commodities as we expect the economic recovery to continue. On a relative basis we see less opportunity for corporate bonds given very expensive valuations. Therefore we have reduced our preference for lower risk-rated corporate bonds.

From a tactical perspective, we see the opportunity for equity markets and currencies outside of the US to catch up over the summer as vaccination rates increase and the economic recovery continues. As a result, last month we increased our preference towards European equities and this month we upgraded Japan and emerging markets relative to the US.

We continue to favour pro-cyclical stocks as economies continue to reopen and recover. Preference for stocks in less-risky, stable and dominate US companies rather than in younger, riskier ones provides some diversification in the event that growth momentum falters.

Asset overview

Our general view of assets over the coming months can be summarised as follows:

Important information

Any views expressed are our in-house views as at the time of publishing.

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Forecasts of future performance are not a reliable guide to actual results. Investment markets and conditions can change rapidly and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

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