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China woes

China woes

Q2 2021 Market Review

It seems my optimism from Q1 2021 Covid number progress in Israel, like many, was too short lived. We hope this finds you well and safe from the latest increase in numbers.

The second quarter of 2021 was less dramatic from a market point of view than the first, however July has been challenging due to China issues, where we do have some exposure (more on that below). Our outlook for the remainder of the year is more cautious than the first part of the year, where the post-Covid growth theme dominated the landscape.

Throughout the Corona period, we have hosted numerous webinars via Zoom and have found this to be a major positive development. We recently held a webinar focused on Q2 2021 and current investment issues and you may follow the link to view it. For those who prefer to read, we will summarize the main points of that webinar here for you.

Q2 2021 Market Performance (30.6.2021)

YTD to 26 July

Q2 Only

Main indices

19.4%

+6.9%

S&P 500 – USA Equities

+18.22%

+9.19%

Nasdaq - Equity

+13.90%

+6.2%

MSCI World - Equity

+11.28%

+5.5%

Tel Aviv 125 - Equity (ILS)

-11.40%

-0.96%

MSCI China – Equity

-2.4%

+1.12%

Global Bonds – Investment Grade

-1.26%

+1.4%

Treasury Bonds USA

-6.39%

+0.8%

Gold

+3.91%

+1.9%

Israeli Corporate Bonds (ILS)

+2.44%

+1.45%

Hedge Funds (liquid Alternative)

Q2 performance across different asset classes was mixed but mostly positive as equities continued their growth fueled surge and bonds recovered slightly from a difficult first quarter.

On a year to date basis stocks are mostly positive and conservative bonds are mostly negative. Therefore, conservative portfolios have done worse than aggressive portfolios.

Inflation

Inflation remains the most significant macro risk in our opinion, however it is difficult to assess what is the real level of inflation, if it is temporary due to Covid supply side shocks, and more importantly what will be the policy response to it? Will the Federal Reserve engineer a recession to control inflation? On balance we don’t think so for the time being, and we believe a significant component of the current high inflation numbers is temporary and that the Federal Reserve will continue to let inflation run slightly higher than we have been used to. When faced with a view that is too difficult to assess, we will stick to our asset allocation principles and not try to be too clever and time the market – this will be too difficult in our opinion, so we remain invested on our long-term plans.

China Woes

July delivered a big policy issue in China, particularly for internet and technology stocks, where we do have a small exposure. The primary reason for the selloff relates to Chinese government attempts to limit and control online education companies' activity as China wants its population to have more children and private education is seen as an obstacle to having more children. However, as always with China, there is far more to the story, especially concerning ADR (foreign company listing in USA) listings of Chinese companies. Both the USA and China are putting pressure on these companies for different reasons and panic selling is the result. The Chinese government wants to avoid the big tech power problem that USA has and the USA wants full transparency on these companies - which China does not want to give. We are monitoring this space and appeal for client patience as this is a long-term investment for us. Chinese internet stocks may change and evolve, but one cannot deny that it is going to be a rewarding place to invest in. In the long-term, we want to be in the Chinese versions of Google, Facebook, Apple and Amazon. Even these stocks had significant shocks on their way to becoming giants…

You are invited to watch our Q2 2021 webinar to hear a little more about these and other subjects. In addition, you can watch our Israeli Market Q2 2021 Review webinar recording (Hebrew). If you have any questions please feel free to contact our investment team at info@piowealth.com.


The aforementioned information is not a substitute for personal Investment marketing, which takes into account the particular circumstances and special needs of each person. The views expressed in this Review should be considered as market comment for the short term for information purposes only. As such the views herein may be subject to frequent change, are indicative only and no reliance should be placed thereon. This Review does not constitute legal, tax or accounting advice, or any investment recommendation, or any offer to buy or sell financial instruments of any kind, and does not take into account the investment objectives or needs of specific investors. Although this Review has been produced with all reasonable care, based on sources believed to be reliable, reflecting opinions at the time of its writing and subject to change at any time without prior notice, neither Pioneer Wealth Management nor any other entity or segment within the Pioneer International Group makes any representations or warranties as to the accuracy or completeness hereof and accepts no liability for any loss or damage which may arise from its use. The writer and the company are unaware of any conflict of interest at the time of publishing the above commentary.

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