Performance, August 2021


As mentioned last month, the earnings season is coming to an end for now – and with generally excellent re-sults from the corporate sector.

Hence, the focus of attention will automatically return to the trend in the economies and to the likelihood of a  continuation of the excellent earnings trend in the corporate sector. And the global economy seems to be in top shape. Nevertheless, growth indicators show a declining trend, but from very high levels. In addition, consump-tion and investments are still supported by a very low interest-rate level and rising employment.

The possibility of maintaining the low interest-rate level was the focus of attention during the most important event of the month. Jerome Powell, chairman of the Fed, held his long-awaited address at the annual economic symposium at Jackson Hole. It was expected that he would announce a gradual tapering of the monthly purchas-es in the bond market, and it was feared that it would cause rising interest rates as was the case when the Fed resorted to the same manoeuvre in 2013 (see chart 1). The chairman of the Fed stated that the Fed intends to start the tapering later in 2021 and as shown in chart 1, this happened without any major ”turmoil” in the in-terest rate market. So far, the Fed’s mission has been very successful, which means that the financial markets have one concern less to consider.

Chart 1: 10Y US real rates

Otherwise, the development in coronavirus still hits the headlines. Although it has resulted in lockdowns of ports and general challenges transporting goods, it has only affected specific countries – and not the general market. A positive story is India where it seems that the explosive development in the number of people being infected has come to an end – and the equity market in India was up by 9% in August.

Asset class performance
The global equity market rose again in August. It is now the seventh consecutive month with positive returns, which is per se remarkable. After having been challenged in most of 2021, the returns in the emerging equity markets were in line with the returns in the developed markets in August. This is, however, primarily due to a 9% increase in India.  Yields were slowly on the increase throughout August. This resulted in negative returns on Danish bonds and high-yield corporate bonds. In return, the credit market benefited from a narrowing of the credit spreads, which resulted in a good positive return on both corporate bonds and emerging market bonds.