08 / 21


After the robust quarterly results of the companies for the 2nd quarter, the fear of a classically weak stock market month of August was not confirmed. Although COVID-19 infections increased significantly again in many countries, hospital occupancy rates did not rise dramatically on a global level, which may explain the market's calm. Towards the end of the month under review, a levelling off of new infections was then also foreseeable in the southern states of the USA, that is precisely in those states where intensive care beds have reached their limit in some cases. US consumer confidence, on the other hand, was surprisingly weak, marked by the even more difficult than expected course of the pandemic. It was therefore only marginally surprising that at the eagerly awaited meeting of central bankers at the "Jackson Hole Conference", the head of the US Federal Reserve continued to adopt a very patient tone. Jerome Powell was very cautious about the inflationary dangers that the central bank is tasked to manage. While the reduction of the current bond-buying program ("tapering") is expected towards the end of the year, Powell has been very patient about future rate hikes, as so far there is no valid evidence of a reversal of the usual deflationary trends of recent years. A "taper tantrum" like the one that gripped financial markets in 2013 is not likely to recur, thanks to careful communication (see FOCUS). Chinese economic data were poor across the board, so investors are already anticipating the next round of easing again. The withdrawal of troops by NATO countries from Afghanistan appeared very panicked and uncoordinated because of the rapidly advancing Taliban. The unattractive pictures of the crowded tarmac at Hamid Karzai Airport are likely to become a relic of a failed 20-year military mission under U.S. leadership.

Equity Markets

The stock markets of the developed countries recorded renewed price gains thanks to the continuing expansionary monetary policy and good corporate results. On average, earnings were outperformed by 11% in the USA and by almost 22% in Europe. The Chinese market hardly participated in the positive developments due to ongoing government interventions and the slowdown in economic momentum. Even though many well-known indices, such as the Dow Jones Industrial Index, the S&P 500 and also the Euro Stoxx 50, have not allowed any notable correction so far this year, such corrections can still be found somewhat deeper into the sub-sectors. The energy and transport sectors as well as US small caps have already corrected from their year highs in the range of -11% to -17%, depending on the region. The broad indices were supported during these correction phases of the cyclical segment by strength in the technology sector and in the more defensive segment. The next phase of strength is likely to be more on the side of the cyclically sensitive sectors once worries about the corona virus and concerns about the state of the global economy subside.

Interest Rates

Despite the weakening of economic data relative to expectations, the bond markets did not signal any deterioration in growth expectations. Almost without exception, global government bond yields climbed by 10 to 20 basis points. For once, bond investors seem to be pricing in a somewhat more positive outlook for the economy than the news situation would suggest.

Currencies & Commodities

After the Swiss franc had already shown extreme strength in July, a countermovement took place in August. The oil price was extremely volatile and fell by almost 7%. Cyclically sensitive metals also lost between 3% and 14%.


Despite the relentlessly strong equity markets, investor sentiment in the U.S. has rather deteriorated. Survey data shows that retail investors are as cautious as they were last time in January 2021, and this despite the fact that the U.S. equity market has now gained for seven consecutive months. Historically, this is a promising outlook for further gains over the next 12 months. With the economic recovery expected to continue and monetary policy remaining loose, equities will continue to be the preferred haven relative to other real assets. However, central banks are performing an increasingly difficult balancing act after years of expansionary monetary policy: The challenge of not immediately undoing the economic stabilization gained through cheap money with more restrictive monetary policy presents monetary authorities with a dilemma between rising inflation and financial market stability. The recent past has shown that stock markets react quickly to a harsh reduction in stimuli. The responsible players are currently well aware of this, so that they are more likely to accept overstimulation and, consequently, overshooting inflation. Together with the renewed slackening of sentiment, this continues to be supportive for equities.


Focus Market Forecast