Small-caps and EM lead the August risk rally

Equity markets were broadly higher in August, propelled by a late-month resurgence in risk appetite. But this impressive finish belies the powerful risk-off tensions on display for much of the month.

Those tensions rose with mounting worries about the rampant Delta variant, stubbornly high inflation (particularly in the US) and related uncertainties about the Fed’s policy response. Market anxieties culminated in a sharp ‒ yet short-lived ‒ downdraft across global markets mid-month.

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