Acumen Portfolio Performance Q2 2021
Commentary on Portfolio Performance – Quarter 2 2021
The second quarter of the year again saw all portfolios finish in positive territory. Although the bullish sentiment in the market continued, the period was not without volatility, particularly in May, however effective diversification within the Acumen portfolios saw a smoother ride for investors.
Global equities advanced in Quarter 2, supported by the accelerating roll-out of Covid-19 vaccines. Many indices struck new all-time highs. Quarterly earnings for Quarter 1 were generally very robust across the board, with the exception of the healthcare sector and financials which performed poorly as market interest rates fell.
The Federal Reserve’s (Fed) rate-setting meeting indicated that interest rate rises could come earlier than expected a few months ago although subsequent comments by Fed officials sought to allay any worries over tightening monetary policy too quickly. Crude oil and natural gas as global economic activity continues to rebound after the Covid-19 pandemic.
Markets in Quarter 2 2021
Global equity markets continued their year-long rally into April. Corporate profits, vaccine progress, and support from the Central Banks sustained the momentum. The United States led the way, driven on by company earnings reporting well ahead of expectations, and the prospect of more fiscal stimulus from infrastructure spending. US equities’ gains in May were tempered by fears that central banks would start to tighten monetary policy sooner than expected after US inflation jumped to a 13-year high at 4.2% and US job vacancies were taking time to fill, a warning of wage inflation.
The S&P 500 and NASDAQ both hit record highs at the end of June. Energy stocks outperformed as the price of oil moved to a level last seen in 2018. While the U.S. has led the global post COVID-19 recovery, other areas of the developed world are catching up.
The trend within the eurozone, is of rising vaccinations, fewer Covid cases and an easing of lockdown restrictions. Eurozone PMI survey for May was stronger than expected. ECB promises of intervention continues to give confidence to the Euro markets which were less volatile than other markets.
Emerging market equity growth was tempered by the COVID-19 surge in India and increased global tensions with China. A heavy debt burden curtailed the South American economies to deal with the pandemic but they were buoyed substantially by the rise in commodity prices at the end of the quarter.
Faster economic recovery and a reopening of the economy have increased inflation and interest rate expectations. The ECB committed to intervene to provide support and contain funding costs. Headline inflation rose from 1.6% in April to 2.0% in May, but the ECB expects this to be transitory. A large proportion of this was a result of resurgent energy prices.
The rate of vacancy in the Dublin Office sector remains high while in the suburbs it declined. Some high-profile retailers ceased trading in 2021. The industrial sector has seen a continued increase in activity and prime industrial yields in the Dublin market have fallen further since the beginning of the year. A measure was announced to restrict the bulk buying of residential properties by introducing 10% stamp duty where one entity buys more than ten houses.
Comments from the Chinese authorities about speculation in commodity markets have derailed the rally in base metals such as copper for the time being. Lumber fell 40% in June as supplies came on line and building slowed. Oil hit prices above $73 a barrel, and Gold rose on higher inflation expectations.