October – November 2021

U.S. Economic and Market Highlights

The Economy

  • Investor optimism declined as global economic data lost some momentum.
  • Various European governments reinstituted corona virus-related lockdown measures which is likely to further delay progress toward a full economic recovery.
  • The euro fell back below 1.13 versus the USD, as the European Central Bank (ECB) is considering additional financial support to the lagging economy, as industrial production unexpectedly dropped in Spain and Italy and Covid cases increased in Germany.
  • U.S. headline inflation rose in November at an annual rate at 6.8% and core inflation (excluding food and energy prices) rose 4.9%. These rates were in line with market predictions but are the highest reported rates since October 1984.
  • Central banks in developed countries (the Fed and ECB) have not changed short-term interest rates despite inflation pressures. Instead, they have signaled a tapering of asset purchases, but stimulus is still running at a very high level.
  • Other countries, particularly in emerging market countries, such as Poland, Czech Republic, and Hungary started to raise rates, which has done little to moderate inflation. More rate increases are expected in 2022.


  • The S&P 500 and other equity indices sold off in late November on fears of a worseningOmicron variant. When South Africa reported no signs of increased severity, equity markets responded positively with a more than 3.5% since the 1st of December. 
  • Large-cap stocks outperformed their smaller peers in recent months and growth-oriented stocks largely outperformed value style equities thanks to strong company earnings’ reports.  (See Market Tracker below.)
  • Growth indices now lead their value style peers year-to-date (YTD) within the large-cap space and value indices remain higher than growth amongst small-cap companies.
  • U.S. stock market indices continue to exhibit elevated valuations compared to historical norms. But the equity risk premium remains positive because of low bond yield rates. This means even with high valuations stocks are attractive relative to bonds.
  • ‘Tis the season for retailers to show strong performance. Larger retailers in the U.S. have been able to better navigate acute supply chain challenges, while others are experiencing difficulties because of elevated shipping costs, higher wages, poor inventory planning and a sharp increase in organized retail theft.

Fixed Income

  • The U.S. 10-year Treasury bond yield fell sharply at the beginning of December to slightly lower than 1.35% from nearly 1.67% a week earlier. This flattening of the yield curve indicates a bearish shift from bond investors about the economic outlook, as inflationary trends pressure the Federal Reserve to taper bond purchases sooner. 
  • Investment-grade corporate issuers (companies) took advantage of the lower rates, by borrowing/issuing more than the estimated new issuances in November. Corporations are trying to get ahead of the declining demand for bond purchases as the Fed accelerates its plans to taper bond purchases.
  • High-yield corporate bonds had negative performance returns in November as yields increased along with risk estimates. When the economy weakens, profits tend to decline and so does the ability of high yield bond issuers to make interest and principal payments. This leads to higher interest rates and declining prices on high yield bonds.
  • Green bond issuances are up 75% yearoveryear at the end of the 3rd quarter and estimated to exceed $1 trillion for the full year. Green bonds enable issuers to raise money on capital markets with proceeds specifically aimed for green projects, such as renewable energy, energy efficiency, biodiversity preservation, or green buildings.

This communication was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.