Performance, September 2021


September ended with negative returns on global equities (-2.3%), and it is the first time since February that equities are losing value. Uninterrupted positive returns over a 6-month period are not standard, and actually it only happened 12 times over the past 150 years. From the top of the equity market in early September the correction has been 5.7%, and it is more than 200 days since we have seen a correction above 5%. Therefore, investors may also see this as a ”great” event but it is important to bear in mind that the standard in the past 100 years has been more than three corrections of 5% a year.

Therefore, we see this correction as a rather normal market movement. When the correction hits, everybody is seeking an explanation, and this time around we may point to several aspects which may have been the ”cause”. Slightly increasing interest rates in continuation of new signals from especially the Fed, fear of a lockdown of the public sector in the US due to political negotiations about the debt ceiling and finally slightly more difficult-than-expected negotiations about a new stimulus package in the US (infrastructure) are some of the suggestions. 

It is positive news that the development of the coronavirus epidemic, both considering the number of people being infected and deaths on a global scale, is on the decline. Hence, the ”third wave” seems to have peaked (see chart 1). This lowers the risk of new lockdowns and will mean that the future economic growth will continue to benefit from rising activity in society.

Chart 1: Development in coronavirus (globally)

(Source: Bloomberg, 2021)

Asset class performance
September closed as a sad month in terms of return. Negative returns on (almost) all asset classes were the result at the end of the month. The worst performer was the equity market which shed 2.3%. Still, it must be borne in mind that the annual return on equities is still just below 20%.
But also rising interest rates affected our bond portfolios. Worst hit were the emerging bond markets with negative returns of 1.7%-2.2%. The Danish mortgage bond market closed the month down by 0.7%.
The best-performing asset class of the month was our alternative investments which closed September with a zero return.