Macroeconomy
Key economic indicators — the more than 100% surge in exports, adequate fiscal room for higher infrastructure spending, and steady price movements which may eventually soften should supply-side constraints ease — will help counter the headwinds in the job market. The latter weakened in April due partly to the renewed mobility restriction starting mid-March. This may dampen consumption in Q2.
Fixed Income Outlook
With improved market sentiment and U.S. Treasuries moving sideways, the local bond markets experienced a mild rally as observed in both auctions and secondary market. Short term tenors outperformed the curve and will likely continue its appeal, given the huge liquidity of banks and better risk appetite among investors. Furthermore, inflation may have peaked but it will not drastically fall in the near-term, considering supply side issues and higher petroleum prices still above $70/bbl.
Equities Outlook
Investors sent the PSEi up by 4% in May to 6,628.49 and continued its run towards 7,000 in June. Property and Holding sectors gained the most. While foreign investors remained on the sell side in May, they began to gingerly return to the market in early June. Seeing the bottom, investors have returned and most analysts have upgraded their projections for PSEi in 2021. Reported new orders for vaccines have raised hopes that the rollout of vaccines will accelerate in H2. However, the recent sharp gains may falter in the short-run as investors take profits with the new hawkish stance of Fed. We expect volatility ahead as the global economic recovery appears uneven and surprises may still emerge.
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