Market overview – Alan McIntosh, Chief Investment Strategist
Global stock markets ended the week on a soft note as a number of factors weighed on sentiment. Recent economic data, particularly from China, has shown a deceleration in the pace of activity compared with a few months ago. In a sense, this shouldn’t be a huge surprise. A sharp recovery boosted by plentiful monetary and fiscal stimulus will deliver sharp year on year comparisons, but will ultimately start to fade. Nevertheless, there are some other factors at play that are adding to uncertainty. Despite good success with vaccination programmes in most western countries, there are still many parts of the world where vaccination rates remain low. A continuing spread of the Delta variant is limiting full restoration of activities and this, combined with strong demand, is contributing to the supply bottlenecks that have been widely reported in recent weeks. This of itself has created pockets of inflation in certain product areas, although some of that is now beginning to wind down. For example, lumber prices quadrupled between April 2020 and May of this year, but have since fallen by around 70%. While this is good news, elsewhere pressures continue. Natural gas prices have doubled in the US since the start of the year and wholesale prices have risen by even more in Europe. This extreme price volatility is creating problems all the way through supply chains. Central banks have a lot to digest as they formulate exit strategies from unprecedented levels of monetary stimulus.
It is only right to note the passing of Sir Clive Sinclair, one of the pioneering geniuses of modern technology. Mostly remembered for bringing affordable home computing to millions in the early 1980s, his track record was not without the odd blemish. One of his early products, the Sinclair Black Watch, was a digital timepiece with an LED display, available fully assembled or as a kit. Sadly, the quartz crystal it used proved to be sensitive to ambient temperature, leading to the watch running fast when it was warm and running slow when it was cold! And then there was the C5…