Market review – September 2021

As the US economy continues to recover at a pace quicker than the US Federal Reserve (Fed) expected, they have indicated they may begin reducing their stimulus packages sooner than previously anticipated. The minutes from the Fed’s July meeting, which were released in August, and Fed Chairs Jerome Powell’s annual speech at the Jackson Hole symposium, both provided strong indications for a tapering of the current stimulus. However, Powell was very keen to emphasise that policymakers would be in no rush to tighten interest rates. In August, The Dow Jones Industrial Average Index rose by 1.2%.

Inflation continues to be a main headline in the US, and Powell used part of his speech to again address these concerns. Once again, he insisted that the inflationary pressures are merely a temporary issue caused by pandemic-related factors. Perhaps backing up his claim, the rate of inflation fell from 0.9% to 0.5%. This was the biggest fall seen in this index for over a year. He did, however, acknowledge that pressure on prices is higher than the Fed would like.

Much like the US, inflation is very much in focus in the UK. The annualised rate of consumer price inflation fell by 0.5% in July to 2%. The Bank of England (BoE) has indicated that inflation could rise as high as 4% by the end of the year. However, like the Fed, the BoE stands by its previous statements that they see these rises as “transitory” and expect the rate to fall back towards their target of 2% during 2022.

The issues that we have seen in regards to supply chain are not helping inflationary pressures in the UK are. Manufacturers are said to be experiencing the worst ever shortage of stock, according to The Confederation of British Industry (CBI).  During the three months up to July, job vacancies reached their highest level at 953,000. Maybe most publically, and certainly not helping the supply chain, has been the reported shortage of HGV drivers currently in the UK. During August, the FTSE 100 Index rose by 1.1%.

Japan managed to host the delayed Olympic Games during August, which were seen largely as a success. However, these took place against a backdrop of a country still battling Covid-19, and in particular, the Delta variant. There are concerns on how this is affecting the ability for continued economic growth, whilst the country is still under a state of emergency. In August, the Nikkei 225 Index increased by 3%.

At the risk of sounding like a broken record, Germany’s inflation rate rose to levels not seen since 2008 in August. The annualised increase of 3.4% was well above the European Central Bank’s 2% target. The second quarter saw a revised quarter on quarter growth estimate of 1.6%, helping to show Germany’s economic growth continues to rebound in 2021. Elsewhere in Europe, and showing that it’s not just an isolated problem for the UK, there have been supply chain disruptions. The German Dax Index rose by 1.9% by the end of August.

I very much hope that as the lockdown restrictions have relaxed in the UK, you have been able to take advantage of this over the summer. As always, if you have any queries in regards to any aspect of your financial planning, please do get in touch with myself or one of the team.