• US equities outperformed their developed market counterparts in July, with higher-growth stocks performing particularly well due to lower bond yields and renewed concerns around the Delta variant of COVID

• European, UK, and Japanese equity markets were flat to down for the month, as heightened concerns around coronavirus weighed on investor appetite for cyclically-orientated companies

• Chinese equities fell sharply during July, as severe regulatory action by Chinese authorities in certain parts of the market surprised investors and sapped confidence

• The global treasuries index was up strongly on the month, as concerns surrounding the delta variant coupled with signs that global growth may be moderating caused investors to seek shelter in safe havens.

• Global corporate credit indices rallied on the back of growing risk appetite, improving oil prices and continued loose monetary and fiscal stimulus globally. Global investment grade credit outperformed high yield credit due to its higher positive sensitivity to falling interest rates.

• Emerging market debt benefited from lower US yields combined with strong commodity prices although some EM central banks have raised rates in response to rising inflation which saw EM debt issued in local currency underperform relative to that issued in US dollars or Euros.

• Gold gained 2.4% in July in an attempt to bounce back after June’s 7% drop, however, improving economic data and expectations on earlier than expected withdrawal of monetary stimulus from the Federal Reserve are likely to become headwinds for Gold in the second half of the year.

• The US Dollar fell 0.3% after a large rise in June, looking forward however, expectations of rising treasury yields and solid economic growth are likely to assist the US Dollar’s rise in coming months.

The economy is expected to grow in 2021 at its fastest pace since the 1980s as pent-up consumer demand from record high levels of savings boost consumption, stimulus from Biden’s multiple trillion-dollar fiscal packages are deployed, and as more than 50% of the population are now fully vaccinated. Housing affordability has fallen sharply as house prices reach all-time highs above 2007 levels, whilst the labour force is still nearly 6m workers short of pre-pandemic level.

After a slow start the European COVID-19 vaccination programme has accelerated to broadly in line with the UK, leading to the re-opening of the economic bloc this summer. Member countries will soon benefit from European Recovery Fund stimulus spending, and together with continued ECB stimulus support via the Pandemic Emergency Purchase Programme, expectations for a stronger economic rebound this year and beyond are growing. However, southern economies are suffering another summer of disappointing tourism activity as international travel restrictions largely remain in place, and higher inflation is beginning to hamper consumer confidence and credit growth.

British households have used long winter lockdowns and government furlough schemes to strengthen their finances and become net savers in anticipation of the end of all COVID-19 restrictions in July and subsequent summer spending spree following a successful vaccine rollout programme this year. Infections are on the rise as the country unlocks but hospitalisations remain low thanks to effective vaccines. The Bank of England said Britain’s economy would grow by the most since World War Two as it raised its estimate for UK GDP growth in 2021 to 7.25%, above market expectations.

Japan is struggling to control a third and prolonged coronavirus infection wave as the delta variant spreads across Asia, but the Summer Olympic Games have carried on without any major disruptions. Despite substantial monetary and fiscal policy support, a vaccine-sceptic population may hamper a significant economic rebound in 2021. Inflation levels are rising albeit from a negative base and are still significantly lower than across other G10 economies.

Chinese economic growth is expected to rebound above its trend growth rate of around 6%, to between 8-9% this year. However, being the first economy to recover from the pandemic last year means that the Chinese recovery is now ageing and beginning to slow from its peak, whilst headline consumer price inflation remains low and relatively benign, allowing policymakers to easy liquidity conditions. China’s vaccination programme is picking up pace after a slow start.

Emerging economies have found themselves lagging the global vaccine rollout programme with most of the poorest EM populations currently largely unvaccinated. Despite the outlook for a buoyant global economy in 2021 as broad economic momentum gathers pace and reflation policies take hold, key economies in Brazil, India, Russia and Turkey are still fighting elevated COVID-19 infection rates, increasing the risk of new and deadlier global virus variants.

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