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Mixed week for equities with policymakers to the fore -Weekly Investment Review 27 September 2021

Equities had a poor start to last week, with the S&P 500 seeing its worst day
in a number of months last Monday. However, much of the losses were
recouped throughout the rest of the week as major markets finished on more
solid ground. The possible default of Chinese property developer,
‘Evergrande’ was the source of much consternation as investors feared any
collapse could lead to a global sell off. However, Chinese authorities had
stepped in by mid-week which saw a capital injection into the banking
system and a restructuring plan announced for Evergrande.
The U.S. Federal Reserve met on Wednesday with no change in the headline
interest rate, as expected. However, Fed Chair Powell did give further hints in
his press conference in relation to plans for tapering of bond purchases and
a more ‘hawkish’ tone is beginning to emanate from the individuals on the
committee. Bond yields (which move inversely to prices) moved higher on
both sides of the Atlantic. There was little in the way of U.S. economic data
last week, but housing starts rose 3.9% whilst building permits climbed 6.0%
as new home sales were up 1.5% in August. The property market appears to
be still navigating a number of supply side concerns.
The Bank of England also kept its headline rate unchanged at 0.10%,
although two board members made the case for higher rates as Governor
Andrew Bailey stated he sees inflation at elevated levels over the next year.
The German election took place over the weekend, with the initial results too
close to call. A coalition between the SPD and the CDU/CSU bloc looks
likely as a strong showing from the Greens has also brought them into the
equation. Market reaction has been muted with the final makeup of the new
government unlikely to deviate massively from previous polic