Home | Review of H1 2021 | Asset Class Review

Equities delivered strong returns in H1 2021 amid the global economic recovery, with a global rotation into value sectors. However, bond prices dropped as longer-term yields rose on the back of inflation concerns and expectations of higher rates. Rising bond yields have also led to a strengthening USD and a fall in gold prices, which subsequently rebounded, coinciding with higher volatility in cryptocurrencies.


Despite higher volatility brought on by inflation concerns, the global economic recovery drove strong equity returns in H1 2021, with Developed Markets leading the way. US equity gains centred on reopening efforts; rotating away from 2020’s growth winners like Technology, Consumer Staples and Communications towards value sectors such as Energy, Financials and Materials. This has resulted in a more broad-based recovery, which will increase the resilience of the US equity market going forward.

European equities initially lagged, but have since overtaken US equities given their higher exposure to value companies, and remain a good opportunity for investors. Despite the ongoing challenges in containing COVID-19, export-oriented Japanese equities were driven by a cheaper Japanese Yen (JPY) and the higher demand anticipated from the reopening of Western markets.

Asia ex-Japan equities were held back by uncertainties from China, as Beijing increased regulatory pressure on its technology sector and its central bank reduced liquidity amid a strong economy. Many Emerging Markets have struggled to obtain vaccines and this has hindered attempts at economic reopening.

MSCI World Net Total Return USD Index

YTD Total Return (%)

Fixed Income

A swing towards strong economic growth drove the risk-on sentiment in markets. Longer-term US Treasury yields rose on inflation fears and expectations that interest rates would likely be raised. This pushed down bond prices across the board, except for US and Asian High Yield bonds where narrowing spreads cushioned against rising yields.

Among the rest of the fixed income sectors, Asian Investment Grade (IG) fixed income remained relatively more resilient and is preferred for its balance of defensiveness and yield. Meanwhile, pressures against Asian and certain Emerging Market local-currency debt were offset by Chinese Yuan (CNY) strength against the US dollar (USD).

Bloomberg Barclays Global-Aggregate Total Return Index (Unhedged USD)

YTD Total Return (%)

Currencies and Commodities

The USD had risen in H1 2021 due to rising bond yields, but cyclical and risk currencies like the CNY strengthened even more as a result of a positive growth outlook. However, the British Pound (GBP) emerged as the top gainer as tail risks from Brexit, negative UK policy rates and COVID-19 infections largely dissipated.

The robust economy fuelled strong demand for Oil and Copper, which recorded solid double-digit gains. Conversely, Gold fell as US Treasury yields rose. However, China’s recent stockpiling of the precious metal, coupled with cryptocurrency outflows, has stemmed the drop in Gold prices.


US Dollar Index

YTD Movement Against the US dollar (%)


Gold & Brent Crude Oil

YTD Total Return (%)

Source: Bloomberg. All percentages shown are expressed in their respective local currency terms, and reflect the total returns between 1 January and 15 June 2021.