Investment Newsletter – July 2021
Countries across the Asia-Pacific region are scrambling to slow the spread of the more infectious delta variant, reimposing restrictions and stay-at-home orders in a jarring reminder for societies that had just begun to reopen that the pandemic is far from over. The lockdowns and restrictions have deflated hopes across the region, where many countries avoided the worst of the pandemic’s initial spread last year. Now, weary residents are frustrated by what some describe as their countries’ pandemic regression, as other parts of the world edge toward normalcy. Despite studies have shown that COVID-19 vaccines are still largely effective against the delta variant, the protection is significantly lower for those who are partially vaccinated. Besides, the experiences of several countries show that the delta variant can spread rapidly through the unvaccinated, including children. That said, COVID-19 cases show sign of global resurgence, due to a new more contagious delta variant.
While the second-half of the year could be bumpier or more volatile for financial markets, it is expected that equity markets to consolidate or continue upward path. Inflation worries are likely to contribute to market jitters, but it will take a lot of bad news to shift the central banks towards a even more rapid withdrawal of liquidity. Value stocks have still outperformed growth stocks year-to-date and it is believed that value has room to run if bond yields rise from a support at 1.40% for 10-year Treasury yields. It is believed that the recent underperformance of Asia and China, due to worries over policy tightening and vaccine progress, is temporary and that the structural case for Asia remains intact.
