Effective November 27, 2021, the deferred sales charge and low load sales charge purchase options will no longer be available for purchase on Sun Life Global Investments mutual funds. Switches between funds of the same sales charge purchase option will be permitted.
A review of the week's top global economic and capital markets news.
For the week ending 15 October 2021
As of noon on Friday, global equities advanced on the week as markets reacted well to more details disclosed about the US Federal Reserve’s plan to taper its asset purchase program. The yield on the US 10-year Treasury note declined to 1.57% from 1.61% a week ago while the price of a barrel of West Texas Intermediate crude oil rose to $82.15 from $79.80 last Friday. Volatility, as measured by the Cboe Volatility Index (VIX), declined to 16.5 on Friday from 18.7 last week.
Consumer prices rose 5.4% year over year in September, up from August’s 5.3%, as global supply chains remain disrupted. Food, shelter and energy price rises all contributed to the uptick. While inflation pressures are likely to ease once logistical logjams resulting from the pandemic are unraveled, the process is taking longer than expected, with no timely resolution in view. Central banks remain in a quandary over how to deal with the price rise as negative supply shocks are not easily addressed by monetary policy. Policymakers are watching inflation expectations closely for signs that inflationary psychology is taking hold. The recent spike in the cost of living resulted in the US Social Security Administration announcing that monthly payouts to retirees and other beneficiaries will rise 5.9% in 2022, the largest such adjustment in 40 years.
In the minutes from the September meeting of the Federal Open Market Committee, the Fed outlined its plan to taper its purchases of Treasuries by $10 billion per month and mortgaged-backed securities by $5 billion, winding down the asset purchase program by next summer. The committee could adjust the pace of the moderation of its purchases if economic developments differ substantially from what they expect, the minutes said.
Energy-intensive industries such as makers of ammonia and fertilizers have begun to curb production in Europe as a result of rising price of natural gas and other forms of energy. German electricity rates reached record highs this week, raising concerns that additional industries may soon scale back production. Furthermore, there are growing fears that consumer demand will be undermined as a result of strains on household budgets from the energy cost spike.
After earlier appealing to OPEC to increase production quotas, the Biden administration this week implored domestic energy producers to help curb rising prices. This is a significant shift for the administration, which has pledged to move the country away from fossil fuels and has halted oil and gas development leases on public lands and canceled the Keystone XL pipeline. Energy producers say they are reluctant to ramp up production, which requires significant capital investment, amid an increasingly hostile regulatory environment.
The International Monetary Fund updated its World Economic Outlook this week, trimming its 2021 global growth forecast by 0.1% to 5.9%. The US forecast was cut to 6% from 6.1% while the eurozone outlook was raised to 5% from 4.6%. China is expected to grow 8% this year, the fund estimates. Amid continuing supply chain bottlenecks, the IMF warned that central banks need to be ready to take swift action against inflation if the recovery strengthens more than expected. Low levels of vaccination against COVID-19 among citizens of low-income countries is a major concern, the IMF said.
US Trade Representative Katherine Tai and Chinese Vice Premier Liu He met virtually last week, the second high-level trade meeting since President Biden took office. Tai emphasized US concerns relating to China’s state-led, nonmarket policies and practices that the government contends harm the American economy. The meeting helped set the stage for a virtual summit between Biden and China’s president Xi Jinping in coming weeks.
With about 8% of the constituents of the S&P 500 Index having reported for Q3 2021, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings growth is running at 29.8% while sales rose about 15% compared with the same quarter a year ago, according to data from FactSet Research. Continued supply chain snags and rising input costs have investors focusing on the potential for margin erosion in coming quarters.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
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Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc., all of which are members of the Sun Life group of companies.
SLGI Asset Management Inc. is the investment manager of the Sun Life family of mutual funds; Sun Life Assurance Company of Canada is the issuer of guaranteed insurance contracts including Annuities, and Segregated Funds. Sun Life Financial Trust Inc. is the issuer of Guaranteed Investment Certificates.
