As we entered the second half of 2021, the global economy’s climb back from the pandemic has started shifting from recovery to expansion.
Here’s a summary of this past month’s notable market-related events.
COVID-19 and Market Developments
- After mid-month jitters over inflation and the Delta variant, the U.S., the Canadian and the global markets rebounded and posted a sixth straight month of gains.
- Approximately a third of S&P 500 listed companies and fifth of TSX listed companies reported strong corporate earnings, including some of the biggest tech names.
- Treasury yields fell slightly on positive market data and economic reassurances from the US Federal Reserve (the Fed).
- The Fed left U.S. interest rates in the 0 to 0.25% range and said it would continue buying Treasuries and mortgage-backed securities to stimulate borrowing and spending. U.S. inflation jumped 5.4%, the highest level in 13 years. The Fed explained that this increase is temporary, mainly driven by supply chain disruptions and rising consumer demand as pandemic-related restrictions are lifted.
- The Bank of Canada also held interest rates at 0.25% but announced a scaling back of its stimulus by reducing government bond purchases. The bank added that it is letting inflation temporarily rise above its 2% target, but if higher prices do not subside as the economy recovers, it will intervene.
- The U.K.’s Freedom Day, celebrating the reopening of its economy, went ahead on July 19. Developments in the U.K. are seen as a potential leading marker for the reopening of other western economies.
- The Canadian federal government unveiled a roadmap to open its borders again. On August 9, vaccinated Americans will be allowed to visit and from Sept 7, vaccinated travellers from other countries.
Canada’s most populous province, Ontario, moved to stage 3 of its reopening plan with restrictions lifted on businesses and public gatherings with capacity limits.
How does this affect my investments?
We are beginning to transition from a central bank-assisted recovery to a more self-sustained growth, so it’s natural we might experience some short-term volatility. However, normal economic activity should resume and expand throughout the remainder of the year. The pace of growth will likely be slower, but this is understandable as we are coming off a record-breaking 12 months of market performance.
Regardless of where we are in the market cycle, it’s important to take a disciplined approach to investing and stay focused on your long-term financial goals. We always recommend maintaining a diversified mix of asset classes in your portfolio to maximize potential returns and minimize risk. Regularly reviewing and rebalancing your portfolio also helps you remain on track.
Should you have any questions, please do not hesitate to contact your NPW Wealth Advisor.