Financial Markets May Have Recovered But It Will Take Longer For Life To Get Back To Normal

This week we marked the halfway point of 2021, a year we hoped would bring a return to normal but has so far failed to live up to expectations. While much of the UK has its hopes pinned on final restrictions being removed in late July, 30,000 daily Covid cases currently might force a rethink. Markets have at least managed to return to a sense of normality, with both the UK stock market and the UK government bond market almost exactly back to where they were in January 2020. The pandemic has provided a wild ride, but for many investors they’re now in the same position they were before the outbreak; hopefully the same will be true for other aspects of life soon enough.

Elsewhere, confusion around travel this summer remains. While the government is keen to let double vaccinated Brits leave on holiday, so far very few countries are willing to let us in. A row over the EU Covid passport scheme looks set to add yet more red tape to European travel, while the Delta variant is testing many of the countries less advanced in their vaccination programmes.



Global equities produced strong returns in the first six months of the year as recovery from the coronavirus pandemic continues. The MSCI World index returned just under 12 per cent for the first half of the year, helped by the strong performance of US equities. The FTSE All Share index is up 11 per cent so far in 2021, helped by the fast roll-out of coronavirus vaccines. In contrast, government bonds have fallen in value after concerns about rising inflation caused a sell-off in the first quarter.

Demand for equities has also caused a boom in stock market listings. This week saw 18 new listings in the US alone, including Chinese taxi hailing service Didi Chuxing and Krispy Kreme doughnuts. Globally there have been 1,263 IPOs in the first half of this year compared with 519 in 2020. The US and China generated the most listings, but other regions have also seen a sharp increase and the number of stock market listings in Europe (including the UK) has hit its highest level in 14 years.



House prices in the UK and US are rising at their fastest rate in decades as the pandemic has helped generate a residential housing boom. US house prices have been driven up by the strong demand for suburban properties as buyers seek more space following lockdowns, and this has been made worse by a shortage of homes on the market. The S&P Case-Shiller home price index saw 14.6 per cent year-on-year in April, which followed the 13.3 per cent upturn in March. According to S&P this is the highest reading in more than 30 years.

Meanwhile, UK house buyers have been rushing to beat the 30th June deadline to qualify for the full coronavirus stamp duty holiday. House price growth has also been fuelled by a pandemic-driven boost in demand, while extremely low interest rates have seen the cost of mortgage borrowing hit the lowest on record. The Nationwide house price index increased to 13.4 per cent in June and the average residential property price in the UK now sits at approximately £250,000 as house price growth in the UK increased to its fastest pace in nearly 17 years.



equities blog thumbnailThe rapid spread of the Delta variant of Covid-19 has added more pressure to travel and leisure stocks as travel restrictions threaten to disrupt the crucial summer holiday season. This week Boris Johnson met German chancellor Angela Merkel and lifting international travel restrictions was one of the prime minister’s objectives.

Passenger numbers have recovered considerably from last year but remain far below pre-pandemic levels and travel stocks have been falling in recent days as uncertainty remains about where and when people can travel. The introduction this week of the EU digital vaccine passport should make travel easier for anyone fully vaccinated or with a negative test. However, the UK remains outside the EU digital passport scheme and travellers still face restrictions in many EU countries. Concern about the spread of the Delta variant has prompted Germany and the Czech Republic to require some travellers to provide a negative test or quarantine on return but fewer visitors will be a blow to countries such as Portugal and Greece where tourism makes up around 8 per cent of GDP.



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