Two questions for autumn

Allianz GI
By September 8, 2021 11:15

Two questions for autumn

Capital Markets Monthly

Summer is coming to an end in the northern hemisphere. Whether the stock markets will begin to see cooler temperatures following the sharp price increases of these past few months, or conversely, whether we can expect an imminent “Indian summer” depends, in particular, on two key factors.

  1. Do the growth forces have the upper hand? The economic outlook – a backbone for corporate profits – does look robust overall. For 2021 as a whole, we expect the global economy to grow by more than 6%, the strongest increase in more than four decades. But there are two things to keep in mind: First, the global economy is now in a more mature phase of the economic cycle and the high point in growth momentum has probably been reached. Thus, starting from exuberant levels, the mood in the US economy seems to have already peaked. Meanwhile, the Chinese economy is already markedly losing momentum. Even the euro area, where economic activity has once again gained momentum in the third quarter, is unlikely to sustain the current pace of growth as the year progresses. Second, downside risks to the global economy have recently increased. The spread of the delta variant hovers like a sword of Damocles above the global outlook. The rising vaccination rates may prompt governments in a number of countries to enact differentiated restrictions. Meanwhile, material and capacity shortages, 21 months after the outbreak of the COVID pandemic, are more persistent than originally expected. Consumers are now also feeling the sharp rise in the price of pre-products, although declining inflation rates are expected in the coming quarters. Despite these uncertainties, the growth forces are likely to prevail, with solid growth rates above trend in the second half of the year.
  2. Will the central banks manage a cautious monetary policy turnaround? Following the broad-based monetary easing in the exceptional year 2020, the global central banking landscape has become more diverse. The first steps towards normalisation have already been taken or are emerging, although central banks continue to…

Allianz GI
By September 8, 2021 11:15

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