Market Update

09 September 2021

This content is for professional investors only as defined by the MiFID.

The synchronisation of fiscal and monetary policies, the increase in vaccination and the gradual reopening of economies have enabled the world economy to rebound strongly: the economic recovery is not, however, synchronous between different regions of the world and sectors of activity.

The world economy is expected to grow by 6% in 2021 according to the latest IMF forecasts. The outlook has been gradually upgraded for developed countries, and for emerging countries it remains largely unchanged at 6.3%. As for China, once the world's leading driver for growth, the country is facing a slowdown in its activity against the backdrop of the resurgence of the pandemic and efforts to catch up running out of steam.

In the US, Joe Biden's administration injected $1.9 trillion (9% of GDP) into the economy in March 2021, adding to the $900 billion stimulus plan announced in December 2020. Additional fiscal stimulus measures are expected in the second half of 2021. Simultaneously, the European Union started to distribute funds from its €750 billion 'Next Generation EU' recovery plan, the majority of which will be committed over the period 2021-20231. The beneficiary countries have a reform and investment programme in line with the EU's climate and digital transition objectives.

Sharpening the focus on central banks, the Fed and the ECB remained cautious, deeming inflationary pressures likely to pass. However, the Fed is communicating effectively and preparing the markets for a decrease in its asset purchases by the end of the year. This is already the case in the UK, Canada and Australia, where central banks have already opted to scale down their asset purchase programmes. As for the emerging countries, they are sometimes in a more complex situation. Thus, the central banks of Brazil, Russia, Turkey, Hungary and Chile raised their key rates following inflationary pressures linked to the rebound in commodities, in the absence of massive vaccination, their economies continue to suffer from health constraints.

The greatest concern for investors at the moment remains the health risk. The increase in the number of cases in the United States, the delay in vaccination and the loss of effectiveness of the vaccine against the Delta variant are all fuelling these concerns. The zero COVID strategy of certain countries (Asia, Japan, Australia, New Zealand) could also find themselves in difficulty and disrupt new global production chains. We will then have to expect downward growth revisions primarily in China and the United States.
In this uncertain environment, we have identified resilient areas liable to benefit from the recovery of the global economic cycle:

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