The global equity rally staged a modest retreat for the third quarter:
• U.S. large-cap stocks were essentially flat while small-caps suffered a decline
• International developed markets were mixed but generally remain quite strong year-to-date
• Emerging Market equities registered deep losses which tipped their returns into the negative for the year
Fixed income performance was mixed as yields increased during the quarter:
• U.S., UK and eurozone government bond rates generally increased as prices fell
• Inflation protected securities (TIPS) were the top performing sector followed by high yield bonds
• Emerging market debt and global sovereigns had the steepest losses
• Investors revisited stocks that benefited the most during 2020. These were the work-at-home, big technology companies and other large-cap growth stocks.
• Covid-19 has impacted global supply chains as inventories remain exceedingly low relative to demand.
• Inflation continues to exceed consensus expectations as commodity prices continue to rise
• U.S. consumer demand remained high as household wealth is at an all-time high, owning to booming stock and housing prices
Outlook (the Good and the Bad):
• There are concerns about the fight in Washington over the amount of infrastructure spending and corporate and individual tax rate increases.
• Globally, the earnings of publicly traded companies generally remain robust
• The Fed may be forced to raise interest rates higher and faster than anticipated over the next few years
• Continued renormalization of global economic growth as it continues to get back on track
Disclosures: This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Information provided by SEI Investments Management Corporation, a wholly owned subsidiary of SEI Investments Company (SEI)