In the second quarter, financial markets developed positively. Just like in the first quarter. Most countries were able to recover economically. This was due to vaccination programs against COVID-19 and relaxation of coronagraph measures. There was also job growth. Inflation did not rise further despite the rise in oil prices. Interest rates rose slightly and gold prices recovered.
Equities developed markets
Equity markets in all developed countries rose again. The US recorded the highest return (7.8%). The European stock index posted a gain of 6.5%. The equity market in the United Kingdom lagged behind with an increase of 5%.
The best performing sector was energy. But the performance of the information technology and health sectors also did well. The utilities sector fell slightly. The industrial and consumer goods sectors also lagged the average.
Developments in emerging market equities
Emerging markets are countries that are still developing. The overall index was up 4.1%.
- In Latin America, the regional index rose 14%. The Brazilian market did well with a 22% increase. But Chile’s index actually fell 15%, after rising 21% in the first quarter.
- In Asia, the index rose 2.8%. Here the Chinese market lagged slightly with a 1.4% increase, while the stock market in India continued its recovery with a 6% increase.
- All Eastern European countries had high returns of 13-18%. The Turkish index fell slightly.
Fixed income securities
Government bonds
Government bond yields followed the upward trend, eventually rising slightly during the quarter. This was mainly due to three things. First, continued optimism about an economic recovery. Second, by concerns about rising inflation. And third, by the possible unwinding of various stimulus measures. Interest rates on 10-year and 30-year government bonds from Germany and the Netherlands rose. In contrast, 10-year US interest rates fell slightly.
Emerging market bonds
Emerging market government bond yields were positive this quarter. In particular, bonds of Ecuador, Angola, Sri Lanka and South Africa rose sharply in value. Only the bonds of El Salvador, Poland and Colombia lagged badly.
Corporate bonds
Corporate bonds had another strong quarter. They performed much better (1.8%) than a portfolio of underlying government bonds with a similar maturity profile. Yield differences between the three major markets were small. U.S. returns were +1.9%, while Europe and emerging markets achieved returns of about +1.7% and +2.1%. At the sector level, the differences were quite large. All sectors achieved positive returns relative to government bonds. Only real estate did not.
Summary
Thanks to corona measures and support packages, producer and consumer confidence grew. Consumption and investment also increased. Partly because of this, there were concerns about future expected inflation. However, further (actual) inflation increases did not materialize, so bond markets made up for initial losses. This created a positive market trend.
What do these developments
mean for you?
See below the cumulative annual returns of our investment cohorts through May 31, 2021.
As you know, as of June 1, our investment profiles have been adjusted. With a different investment mix of equities and bonds, returns and risks are better matched. You can read more about this in the letter we recently sent you. You can view this letter on MySPIN.
Below are the returns of our new investment cohorts from June 1 through June 30, 2021.
