What’s happened in markets?

FTSE All Share 1.53 3.64 6.41 10.22 33.26 4.07 6.78
Euro Stoxx 50 1.38 4.94 12.52 14.13 47.29 8.85 9.32
S&P 500 1.39 5.73 11.49 11.91 52.01 18.24 17.24
Japan Topix 0.07 -0.28 6.47 9.53 40.62 6.55 9.99
MSCI Asia Pac. 1.01 -0.26 -0.77 4.93 54.26 9.90 14.37
MSCI Emerg. Mkts. 0.77 0.15 -0.37 4.79 56.02 7.93 12.76
Jo’burg All Shares 2.36 2.89 9.54 17.20 46.29 10.13 8.67
UK Gov’t Bonds 0.16 0.39 -4.95 -6.30 -6.27 3.31 3.10
US Gov’t Bonds 0.37 0.52 -2.41 -3.47 -4.51 4.51 2.33
Global Corp. Bonds 0.25 0.99 -1.76 -2.42 5.79 6.06 4.88
Emerg. Mkt. Local Currency Bonds 1.04 0.85 -3.55 -4.50 11.75 1.38 3.61

Figures in the respective local currencies as at the end of trading on 16/4/2021.

Following a year where economic data and stock markets performance seemed to lose any link, although economic recoveries remain fragile, stock markets are once again trading at new record highs.

While this included the UK, which surpassed the 7,000 level on Friday 16 April, it is the US that continues to set the lead in terms of economic data and stock market performance. Here, US retail sales jumped 9.8% in March as households received their stimulus cheques and lockdowns continued to ease on the back of the vaccine rollout, with the US having now provided one dose to 40% to its population and 25% fully vaccinated. And while headline US inflation only increased 0.6% in March, the biggest monthly increase since August 2012, this takes the year-on-year rate to 2.6% – significantly above the Federal Reserve’s (Fed) published figure of 2%. However, the Fed’s pre-emptive reassurance detailed in the week in review dated 13 April meant that this did not ruffle feathers among equity or bond investors.

The US also remained in the headlines as it has stated it will pull out troops from Afghanistan by 11 September and since it is imposing sanctions on Russia due to its election interference, the SolarWinds cyber hacking and renewed aggression against bullying Ukraine, among other grievances. Financial penalties include preventing US institutions buying new issues of Russian sovereign bonds, with warnings of more actions being promised if Vladimir Putin’s regime does not change its approach.

Meanwhile, in other vaccine news, the latest provider to face difficulties was Johnson & Johnson as its US pause has fuelled speculation that it is not safe, at the same time as the EU suspended its rollout of the vaccine. While this is the latest of the bloc’s vaccine woes, it puts a Eurozone recovery at risk, at a time when France is now less than a year away from its next national elections, and the recovery package agreed in 2020 has yet to move forward and will not do so until all member states have ratified the required legislation.

In markets, emerging markets (+1%) continue to lag developed markets (+5%) over the past 30 days and, style-wise, growth stocks continued to outperform value (+6% vs +3%) over the same period. Utility stocks (+7%) edged higher than material and technology stocks (both +6%), again over the last 30 days, while energy failed to rebound sufficiently to move into the black (-4%). Small capitalisation stocks returned +1% while the 30 day return for large capitalisation stocks was +4%.

Latest Consensus Forecast
UK GDP (QoQ) 1.3  –
UK PMI 56.4 58.2
UK CPI (YoY) 0.4 0.8
EU GDP (QoQ) -0.7  –
EU PMI 53.2 52.8
EU CPI (YoY) 1.3  –
US GDP (QoQ) 4.3 5.7
US PMI 63.7  –
US CPI (YoY) 2.6  –

What’s happened in portfolios?

Going into 2021, the view for many was that the losers of 2020 would shine in 2021 and the year-to-date number supports this: +6% for growth versus +11% for value, as does the UK performance given the FTSE 100 has the highest weighting of value shares of all major world stock markets, which has helped UK stock markets overall outperform (+10% year-to-date). However, investors who remain more broadly diversified are now benefitting from the switch in the past 30 days where growth is up +6% and value ‘only’ up by +3% – a route Nedbank Private Wealth continued to follow.

Meanwhile, one portfolio decision that has been acted on was the choice to take advance of a slight fall in longer-dated yields to allow for a switch into yet more short-duration paper (between one and three years’ maturity), which should hold us in good stead as there is likely to be more news impacting bonds with regard to inflation as prices rebound from the lows caused by the pandemic.

What’s happening this week?

All week • Q1 Earnings Season | 22 Apr • ECB Interest Rate Decision • 22 Apr US initial Jobless Claims