Monthly Market Pulse: May 2021

From a seemingly un-controlled Covid-19 second wave in India, to equity market volatility and fresh new concerns around inflation and inflation expectations, May has been a volatile month on several fronts.  An article in the FT suggested equity markets have started to signal it is time to diversify and we at Blend Network have also seen a new surge in lender interest.

Chart of the month: Inflation expectations

Source: CNBC

Politics & Economics

  • US GDP grew by 1.6% quarter-on-quarter in Q1 and is virtually back to its pre-pandemic level. With lockdowns re-imposed in many places, the EU’s economy shrank by 0.6% in the quarter following a contraction of 0.7% towards the end of 2020, which is technically a recession. Germany’s economy was 1.7% smaller in the quarter.
  • India’s Covid crisis continued to worsen in early-May. The country registered its highest daily number of new infections, over 412,000, on May 5th. Half the world’s daily reported cases now come from India, as well as a quarter of deaths.

Business

  • After 56 years at the helm of Berkshire Hathaway, Warren Buffett named Greg Abel to succeed him as CEO. It is not clear when the 90-year-old Mr Buffett will actually vacate the job. Berkshire’s share price underperformed the S&P 500 over the past two years, but has rebounded in the first quarter of 2021, pleasing its legions of investors.
  • Janet Yellen, America’s treasury secretary, made a swift about-turn and said she was not recommending or predicting a rise in interest rates, after she had remarked that rates would have “to rise somewhat to make sure that our economy doesn’t overheat”. Ms Yellen’s initial seeming support for an increase spooked the markets. She offered further assurances that she is not worried about persistent inflation but does think prices will rise in the short term as economic activity picks up.

Real Estate

  • In April, average UK house prices grew by 7.1% year-on-year, the second highest increase since December 2014. Overall, prices are now up by £15,916 over the past 12 months. We believe the recently announced package of measures to support buyers are likely to continue to provide support to the housing market in the near-term.
  • We believe housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension, additional job market support, continued low borrowing costs and many people still motivated to move as a result of changing housing preferences in the wake of the Covid-19 pandemic.

Equity Markets

  • A recent article in the Financial Times suggested equity markets have started to signal it is time to diversify (link). According to this article, high valuations have started to indicate that investors are anxious and should look beyond tech and consumer stocks.

FX & Commodities

  • Copper price hit an all-time-high in early-May. The reopening of major industrial economies following the Covid-19 lockdown is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011. Copper is up by 28% since the end of last year and has gained 115% from its 2020 lows.

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Your capital is at risk if you lend to businesses. P2P lending is not covered by the Financial Services Compensation Scheme. Investments are illiquid (the inability to sell assets quickly or without substantial loss in value). Past performance is not a reliable indicator of future results.

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