Analysis: Fast and furious first half of 2021 keeps financial markets at full speed


Reuters


LONDON – After the unprecedented swings caused by the pandemic in global financial markets, last year 2021 was never going to be boring, and that’s what has been proven.

Source: Reuters

Vaccination programs and some of the biggest fiscal and central bank stimulus ever made the viewing compelling.

Oil’s 45% rise will be its best start to the year since 2009, global equities are on track for their second best first half since 1998, wood is on fire and “meme” stocks are popular with amateur traders AMC and GameStop are up over 2,500% and 100% respectively.

Add to that another mad race for bitcoin, digital art selling for tens of millions of dollars despite being free on the internet and major gyrations in the government bond markets and you start to make yourself. an idea.

“It has been an extremely dramatic year,” said Hans Peterson, Head of Asset Allocation at SEB Investment Management. “The swings were absolutely huge. It has not been an easy year, it has been quite tumultuous.

Global stocks gained 11%, but major US and German government bond markets had their most difficult first half since 2013 despite improving in recent months.

Bank of America analysts estimate US President Joe Biden’s spending plans bring the total of global fiscal and monetary stimulus over the past 15 months to $ 30.5 trillion, an amount equivalent to the Chinese and European economies combined. .

Central banks alone bought $ 0.9 billion in financial assets per hour. This fueled a $ 54 trillion surge in the value of global stocks, but it also means that US inflation is now annualized by 8%, down from an average of 3% over the past 100 years.

“The buzz for the first half of the year has been the US fiscal stimulus and its relationship to bond markets,” said Eric Theoret, global macro strategist at Manulife Investment Management, adding that this would also be crucial for the future.

Global markets in 2021

Reuters chart

HOT OIL

Other seismic movements have been the surge in oil, a 20% rise in copper, and a 30-40% jump in timber and staple foods like corn and soybeans that fuel both the inflation and other markets.

The peak oil streak saw the Canadian dollar and the Russian ruble outperform. Metals helped push up the South African rand, but not the Australian dollar. The British pound has performed well thanks to the UK’s COVID vaccine rapid deployment program, while the Japanese yen and the euro, where progress on the inoculation front has been slower, slipped by 6.7% and 2.5% respectively.

TRUE RETURN

Emerging markets have also seen big movements. Brazil’s race to raise interest rates in recent months has seen its currency go from the worst performance in the world at the end of the first quarter to the best, now up 5.5%.

At the other end of the picture, Colombia and Peru were hit by political uncertainty and the Turkish lira followed last year’s 20% with a further drop of 14%.

Remarkably, the lira was the best performing in the world in the first six weeks of 2021. Then bond yields and energy prices rose and President Tayyip Erdogan sacked another central banker.

Things got even crazier in the crypto markets where bitcoin went from $ 29,000 to just under $ 65,000 in April and fell back to $ 36,000 as countries like China tightened regulations.

An explosion of non-fungible tokens (NFTs), a kind of crypto asset used to track ownership of intangible digital assets such as pictures, videos and music, saw a digital collage gross $ 69.3 million in March, while Twitter boss Jack Dorsey’s very first tweet sold for $ 2.9 million in NFT form.

The NFT boom

Reuters chart

Since their peaks at the start of the year, innovation-related funds or stocks – ARK Innovation Fund, Tesla, solar energy stocks, BioTech stocks and special purpose acquisition companies or SPACs – are down 15 % to 30% although there has also been a rebound since May.

The FAANGS quintet of Facebook, Amazon, Apple, Netflix and Google, for example, jumped 10% this month.

“We are of course in a very unusual recovery,” said Vincent Manuel, chief investment officer at Indosuez Wealth Management, adding that many investors were wondering why 10-year Treasury yields fell back to 1.5% after the pullback. from the Fed. expectations of rate hikes in the United States.

“There is a paradox,” said Citi strategist Matt King. “The more the Fed and the other central banks manage to push everything up, the more the markets have become dependent on this continued flow of liquidity.”

Meme mania saw a handful of stocks skyrocket

Reuters chart


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