Market Overview – 08/09/2021

August closed out with the US stock market rising for the seventh month in a row (January was a down month). This puts the broad equity index ahead by 20% since the start of 2021. Given that stocks recovered sharply last year after the falls in March, investors are right to ask how much further markets can rise. There are two parts to this. The unprecedented stimulus, both monetary and fiscal, is still largely in place. The US central bank, the Federal Reserve, has started its debate about when to start trimming bond purchases, with most commentators expecting the policy change to happen around the end of the year. Any increase in official borrowing costs however still seems well into the future. Fiscally, some of the COVID support programmes are coming to an end, but there are proposals for further infrastructure and social care packages working their way through Congress. Looking at the rest of the world, the pattern is the same. Monetary and fiscal policy still look accommodative for markets.