September 7, 2021
Global stock prices marched steadily higher again in August, finding ample reason for enthusiasm from both good and bad news.
Cyclical and value stocks are rallying on indications of robust growth. Meanwhile growth stocks are finding favor when signs of trouble indicate lower interest rates for longer.
Market Impact of COVID-19 Variant
Recently, the delta variant has created a meaningful speed bump to recovery. Mega-tech and other highly priced stocks have responded favorably. Bond prices were choppy but finished the month about flat.
Bull markets are typically driven by expansions in credit while bear markets usually coincide with a contraction in liquidity. Right now, the world is awash with money. The ultimate impact on inflation remains debatable, but many asset types are caught in the currents. The Case-Shiller National Home Price Index rose 18.6% in June from a year ago, the highest rate since its inception in 1987. Eventually, liquidity will retrench for reasons yet unknown. There is no way to know when.
Chinese stocks remained volatile in August as investors evaluated increasing government intervention, especially within the tech sector. Like in the U.S., Chinese mega-tech has been a major driver of wealth creation. It has also created platforms that start to rival government influence over daily life. Increases in Chinese regulation or renewed trade wars remain a global market risk.
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