Markets have had a rough ride. Despite the COVID-19 pandemic, and the economic recession, the global stock markets have continued to soar during the first half 2021.
We are not yet out of the woods. In Malaysia, as well as other parts of the world, COVID-19 cases have risen again.
There is a silver lining: Vaccination roll-outs are increasing both locally and internationally. What does this mean to your portfolio? These are some investing insights from Principal Asset Management Berhad, (Principal), on trends to watch out for in the second half of this year and beyond.
Positive global outlook in the third quarter
It was a strong first half for global equity market. The FTSE All-World index, which represents the performance of global equities, rose almost 12% year-to-date as of July 8, 2021. In the US, the S&P 500 (a stock market index that represents the 500 largest companies listed on the stock exchange in the US) also rose almost 15% year-to-date and reached a record high.
Some investors are worried that this upward trend will not continue. Principal believes the market outlook is still positive due to strong earnings growth. During the first quarter of the year, the S&P 500 had exceeded its earnings expectations. Analysts believe it will continue to produce strong earnings in its second quarter.
Additionally, higher growth prospects and economic recovery are reflected in higher bond yields in the earlier part of the year. This is further bolstered by President Joe Biden’s approval of the US$ 1.9 trillion stimulus package, which will help the US recover economically.
You can invest in the Principal Global Titans Fund to take advantage of global growth potential. It invests in Japan, Europe, and the US.
Asia and ASEAN markets expected to continue its recovery
Many countries in Asia have faced challenges with the recent COVID-19 outbreak. However, there have been some improvements over recent months to ensure that all citizens are vaccinated. The vaccine roll-out has accelerated in many Asian countries.
Principal believes that the investment climate for Asian equities is still favorable. The rollout of vaccines and continued monetary support will ensure that economic recovery continues.
Most ASEAN markets were undervalued in 2020, and therefore have deep-value opportunities this year. Principal believes there are long-term opportunities in the tourism, ecommerce and commodities sectors. However, markets in the Northern parts of Asia may perform better. Southeast Asia is expected to recover more slowly as its vaccination rate is still low – as of July 14, it was only 9%. However, vaccination rates seem to be increasing.