SNAPSHOT2 min read

Market update – September 2021

A summary of our current economic and market views.



Charities Team

Markets remain resilient

Equities are emerging from quiet summer trading in good form, with the S&P500 near record highs. The strong performance comes despite the continued threat from Covid, as the delta variant causes cases to rise around the world. Bond and equity markets also appear relatively unconcerned by the prospect of the Federal Reserve starting to unwind its stimulus measures. This is in marked contrast to the “taper tantrum” of 2013, when the start of policy normalisation caused bond yields to rise sharply. Geopolitical risk has also come back on to the agenda, with the controversial US withdrawal from Afghanistan. While the immediate market implications are limited, the White House has been clear that the move in part reflects the need for increased strategic focus on Asia. This is a reminder that relations between the US and China remain tense and could once again be a source of volatility.

Fed leaves 2021 tapering on table

Fed Chair Jerome Powell used his speech at the Jackson Hole economic symposium to reiterate that “it could be appropriate to start reducing the pace of asset purchases this year.” He also repeated the view that this year’s spike in inflation is a temporary phenomenon. However, we expect continued shortages and bottlenecks – exacerbated by the delta variant – to mean that inflation remains at higher levels than before the pandemic. As US employment continues to recover, this could mean that inflationary pressures build from a higher base next year, potentially weighing on real purchasing power. On balance, we expect the Fed to begin tapering in December and start raising interest rates late next year.

European growth makes a comeback

For the first time since 2007, our economists expect that European growth will exceed that of the US in 2022. To a large extent, this reflects the later roll-out of vaccines in the eurozone. It is also a function of differing responses to the pandemic, with Europe’s furlough schemes allowing for a smoother transition back to work than in the US. Despite the improved growth outlook, we do not expect Europe’s central banks to raise interest rates until 2023, potentially leading to a stronger dollar over the coming year.

Portfolio positioning

We expect that economic recovery and low interest rates will continue to support equity markets. We see opportunities in more cyclical parts of the market as economies reopen and concern around the delta variant subsides. Corporate activity also remains supportive, particularly in the UK, which has seen a flurry of bids for listed companies. We expect inflation to moderate later this year, though markets may be underestimating the risk of higher inflation over the medium term. Given this view, we still prefer inflation-linked bonds to conventional government bonds and retain gold exposure.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Charities Team


The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.