The week in review

What’s happened in markets?

Figures in the respective local currencies as at the end of trading on 26/3/2021.

Investors are becoming increasingly worried at the rising number of COVID-19 cases in multiple regions, which in turn raises the spectre of further restrictions and limits on economic activity. In particular, Europe is facing its third wave due to the new variants. As a result, the German lockdown was extended until 18 April (albeit with a U-turn about Easter), more French regions saw restrictions imposed, and a number of Eastern European countries also toughened up their COVID-19 controls.

Despite this news, economic data is still picking up. The latest flash purchasing managers’ indexes (PMIs) from across the world generally came in much stronger than expected. The Eurozone and US composite PMIs came in at 52.5 and 59.1 respectively. However, they also highlighted that inflationary pressures remained strong, with numerous price gauges at their highest for years. As an example, the US composite gauge of prices paid and received rose to new record highs on the back of supply shortages and supply chain issues. Input prices exceeded prices charged by double digits, which suggests there is pressure on margins. In the UK, the latest employment figures indicated the labour market may be over the worst of the pandemic-derived unemployment, as the figure fell to 5%. UK core inflation came in lower than expected at 0.9%, instead of the 1.4% anticipated.

President Biden hosted his first news conference since entering the White House, where he touched on a range of issues, including China, promising to outspend on innovation and infrastructure. While he declined to say whether he would keep tariffs in place on the majority of Chinese imports, Biden stated he’s open to diplomatic talks with North Korea, although warned that the recent missile tests could still prompt a response. And, on the pandemic, Biden set a new goal of administering 200 million vaccines by the end of April, doubling his target for his first 100 days in office.

In markets, most regions posted positive performance, apart from Japan (-1.36%) and Asia ex Japan (-1.36%). Style-wise, value (+1.33%) outperformed growth (+0.56%). Real estate (+2.68%), consumer staples (+2.44%) and utilities (+2.37%) were the strongest sectors, while communication services (-1.72%) and consumer discretionary (-1.19%) underperformed. Small capitalisation stocks (-0.73%) underperformed their large peers (+1.13%).

What’s happened in portfolios?

There were no portfolio changes during the week of 22 March. Meanwhile, we implemented one minor action, whereby we took advantage of The Renewables Infrastructure Group (TRIG) issue to top up some recently invested client portfolios, where required.This issue is the latest in the renewable energy sector and, as we have noted previously, also affected the prices of our other renewable energy holdings too. Now that this has closed, we would expect market prices to recover for TRIG, down -5.56% in the month up to 26 March, but also for John Laing Environmental Assets (+0.45%). Of the two Greencoat investments, the EUR-denominated Greencoat Renewables posted better performance (+3.02%) versus Greencoat UK (+0.78%) for the month to date.Separately, the resurgence of cyclical and value stocks has supported the +11.54% return year-to-date of Dodge & Cox versus the broader iShares MSCI World exchange traded fund, which returned +3.51% over the same period.

What’s happening this week?

31 Mar • UK Q4 GDP Final | 31 Mar • EU Consumer Price Index | 2 Apr • US Average Hourly Earnings