The overall performance for the month of July was positive for developed market indices, with increased volatility in the second half of the month. The uncertainty seen is due to the following factors:

– The return of concerns about the spread of the Delta variant in many countries.

– Inflation pressures due to lack of manpower, chips, timber and other materials.

– The radical regulatory overhaul by the Chinese government against various sectors such as internet platforms, education and real estate.

The evolution of the COVID-19 pandemic probably remains the biggest concern; however, one must be aware that the evolution of the above listed may disrupt the current growth and affect the trend of the markets.

The positive market trend was mainly due to the permanent accommodative position of the central banks and the stong quarterly corporate results. As far as central banks are concerned, the FED confirmed at its last meeting that it will keep interest rates unchanged as planned and that it would move very gradually towards tapering stimulus only if the USA makes further economic progress. The ECB has announced that interest rates will remain at or below their current levels until inflation reach 2% on a sustainable basis. The ECB is providing inflation projections at +1.5% in 2022 and +1.4% in 2023, which means a long way to go before a rates rises.

As initially mentioned, July was positive for the indices of the developed markets: USA on historical highs, Europe on a slight rise while Asia lost ground returning to levels of the beginning of the year and in some cases even below those levels.

In the USA the S&P 500 index closed July with a positive performance of approx. 1.70%, marking the sixth consecutive monthly increase. The Nasdaq also performed well with a monthly performance of approx. 1%, the sixth monthly increase over seven months. Since the beginning of the year, the two indices have performed 17% S&P 500 and 14% Nasdaq. July confirmed the positive trend in 2021. The yield on the 10-year US Treasury closed the month at 1.2293%, after peaking at 1.74% at the end of March.

Slight increase for Europe with the Euro Stoxx 50 index closing with a performance of 0.26%. Same trend for the FTSE MIB +0.30%, worse DAX with -0.38%.

The Swiss stock exchange did well, with the SMI index posted a +1.17% over the month, thanks to the good results, often above expectations, of Swiss companies. This allowed the index to stabilize at the absolute maximum, reaching the peak of CHF 12’130.

Asian markets did not fare well. The Hang Seng index fell by -8.30%, the Nikkei by -4.94% and the Chinese CSI300 index by 8%. This market divergence with the main western markets is due the Chinese government’s efforts to reverse the trend of inclusion of Chinese markets to international markets, discouraging the listing of technology companies on Wall Street and the radical revision of Chinese regulations towards various sectors such as internet platforms, education and real estate.

Although August, due to summer vacations, is usually a weak period for equity markets we expect the base scenario to continue to remain favorable. However, unknowns and uncertainties, as seen above, are always around the corner. We therefore maintain a positive but cautious position.