“There is now a feeling that the UK could be staring at a fresh Autumn lockdown,” says Susannah Streeter of Hargreaves Lansdown. “Far from giving investors a jolt of confidence, Freedom Day has seen it evaporate, as sharply rising infection rates disrupt businesses.”
The pandemic strikes again
Global markets plunged on Monday as investors feared the Delta variant could derail the recovery. The FTSE 100 fell by 2.3% to close below 7,000. The FTSE 250 dropped by 2.2%. Aviation and leisure stocks were among the worst hit.
The pan-European Stoxx 600 had its worst day of the year so far. America’s S&P 500 retreated by 1.6%. The US ten-year Treasury bond yield fell to 1.18% as prices rose, the lowest level in five months. Japan’s Nikkei 225 index hit a six-month low on Tuesday.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The message from bond markets seems clear, says John Authers on Bloomberg. “Forget about the inflation scare” and “abandon hopes for a strong reopening and economic recovery”. That might seem surprising given recent inflation data, but the Delta variant is driving an enormous surge of cases in the UK.
Only high vaccination rates are preventing another devastating wave of hospitalisations. That bodes ill for places with low vaccination rates, not least parts of the US. The spread of the Delta variant is an especially urgent worry in emerging markets, says William Jackson of Capital Economics. Asia is currently in the eye of the storm. Low vaccination rates mean “much of Latin America” and “other parts of Asia and Africa” look vulnerable, which will slow down their recoveries.
Markets pause for breath
The FTSE’s wobble is a reminder that “escape from an unfree, restricted economy is likely to be a messy affair”, says Nils Pratley in The Guardian. The “pingdemic” is hitting everything from pubs to factories. We still don’t know for sure whether “the lifting of most coronavirus restrictions really will be ‘irreversible’”. As Deutsche Bank puts it, this is all something of an “experiment”. While we wait to see the results, expect “a volatile summer for stockmarkets”. Don’t panic – markets are just entering the “mid-cycle”, says Andrew Sheets of Morgan Stanley. After a very strong recovery over the last 16 months it was inevitable that things would cool down at some point. Never mind the growth worries, “we think that the global recovery will keep pushing on”.
“The easy money has been made in this market,” says Nicholas Jasinski in Barron’s. Wall Street’s favourite “buzzy phrase” right now is “peak growth”. The idea is that growth in “corporate earnings, US gross domestic product, stock prices… and inflation” have all peaked for the cycle.
While the first stage of the post-pandemic rebound lifted all boats, investors must now be more discriminating. They will look for stocks that can “stand the negative impacts of hot inflation and shifting monetary policy”. The answer? Big Tech, out of favour for much of this year, could soon be back in vogue.
-
Barclays warns of significant rise in social media investment scamsInvestment scam victims are losing an average £14k, with 61% of those falling for one over social media. Here's how to spot one and keep your money safe
-
Over a thousand savings accounts now offer inflation-busting rates – how long will they stick around?The rate of UK inflation slowed again in March, boosting the opportunity for savers to earn real returns on cash in the bank. But you will need to act fast to secure the best deals.
-
The industry at the heart of global technologyThe semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
-
Three emerging Asian markets to invest inProfessional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
-
What to consider before investing in small-cap indexesSmall-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
-
Why space investments are the way to go for investorsSpace investments will change our world beyond recognition, UK investors should take note
-
Time to tap into Africa’s mobile money boomFavourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
-
M&S is back in fashion: but how long can this success last?M&S has exceeded expectations in the past few years, but can it keep up the momentum?
-
The end of China’s boomLike the US, China too got fat on fake money. Now, China's doom is not far away.
-
Magic mushrooms — an investment boom or doom?Investing in these promising medical developments might see you embark on the trip of a lifetime.
