Optimism Persisted in Q2, But Investors Exercised Greater Caution

Global equity markets rose sharply in the second quarter, as investors bet on a broadening of the global economic recovery amid advancing vaccination programs. However, while optimism persisted during the quarter, investors exercised greater caution given the Delta variant threat, concerns over increasing inflationary pressures, stricter regulations in the U.S. and China, rising U.S. tax rates, and a looming fiscal cliff in the U.S. following the largest fiscal accommodation since World War II. As investors assessed whether these concerns could derail or slow the global economic recovery, it resulted in a change in market leadership, with cyclicals declining in favor of some higher-growth businesses.

The more transmissible COVID-19 Delta variant spread quickly across the globe during the quarter, leading to new restrictions in many countries, including India, Thailand, Japan, Australia, and Singapore. With a greater market focus on the impact of the Delta variant on economic recovery, developed markets broadly outperformed emerging markets despite strength in emerging Latin America and Europe. Brazil and Poland generated the best returns for the period, while Chile, Egypt, and Peru underperformed. Asian markets were generally among the weakest performers as investors grew more uneasy toward the Chinese government’s greater intervention in its private sector.

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The commentary is the opinion of SGA. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Past performance is not indicative of future results.

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Index definitions:MSCI USA Index measures the performance of the large and mid cap segments of the U.S. market. MSCI AC Asia Pacific measures large and mid-cap equity performance of developed and emerging markets countries in the Asia Pacific region. MSCI All Country World (ACWI) measures equity performance of developed and emerging markets. MSCI EAFE® measures developed foreign market equity performance, excluding the U.S. and Canada. MSCI AC World ex U.S. measures equity performance of developed and emerging markets, excluding the U.S. MSCI Emerging Markets measures equity market performance in global emerging markets. MSCI Europe measures equity market performance of Europe’s developed markets. MSCI Latin American EM measures equity performance of Latin America’s emerging market countries. Indexes are free float-adjusted market cap-weighted and calculated on a total return basis with dividends reinvested.