When it comes to describing the impact of climate change, some experts would call it ‘global weirding’ rather than ‘global warming’. By ‘weirding’ they mean that extreme weather outcomes have become far more numerous than scientific modelling would have you expect. The pandemic seems to have had similar effects on economics: both the breakdown and subsequent rebound are beyond anything we have seen in economic history books.
It is time to look back on the first half of 2021 before everybody else does. The past months will make it to the history books for the biggest rebound ever on many levels.
Oil prices were up by half, oil & gas stocks by a third, and financials by a quarter at one stage. These are watermarks for any future recovery. Q2 growth is nominated in the category of ‘highest ever’.
Trying to sum up the first six months of the year is an exercise in keeping superlative use under control or refraining from inventing new ones:
First, in the macroeconomic space, the first half of 2021 was a bumper period for growth and inflation rates. Again, there were some leads and lags, as the pandemic’s impact ran in different cycles in the various regions. However, quoting some numbers will give you a flavour: Chinese retail sales were up by a third, and purchasing managers’ indices reached 15-year highs overall and the highest reading ever in the US, marking a record. Even those economies that are not particularly known for strong growth, such as the United Kingdom, will likely post a Q2 growth number north of +20%. The kickstart could be felt in inflation gauges as well. In China, producer price indices rose by 9% year-on-year and in Europe by 8%. Even US consumer price indices spiked by 5%.
So how did the markets do?
The winner was crude oil, with prices up by half (i.e. 50%) at one point. In equities, oil & gas stocks increased by more than a third (36%), while financials were up by a quarter (25%). Away from the current winners, last year’s darlings (e.g. Chinese stocks and gold) were largely flat. It was hard to lose money in the first half of 2021 unless you were invested in safe-haven government bonds, which cost investors mid-single-digit percentage points, or cash, where recouping the losses in purchasing power is almost impossible compared to the bond space. However, you have heard that story here before.
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What is going on in the markets? Julius Baer’s experts share their views.