z-kolkiemz-kolkiem

April 2020: investment market commentary

It was a much better month in April over March for investors, despite the bad economic data, as Andrew Yeadon’s update explains.
Share on facebook
Share on linkedin
Share on twitter
Share on email
Published 4 May
4 mins
As the pandemic spread and global case numbers continued to rise, some investors chose to look through what they hope will be a short (but deep) economic contraction towards a potential recovery in the second half of the year. While the extraordinary monetary and fiscal policy responses from central banks and governments have played an influential role in calming markets, optimists were also buoyed by growing talk of lock-down exits, slowing growth in COVID-19 cases, and potentially more effective treatments, such as Gilead Science’s Remdevisir.

This crisis is unprecedented in the modern era, and a great deal of uncertainty remains. Although the level of volatility reduced a little from the extremes seen in March, it has remained elevated. Many corporates have responded to the uncertainty by reducing costs and shoring up balance sheets, which has resulted in a sharp rise in unemployment and a high level of bond issuance. Another response has been the wide-scale suspension of dividends and the withdrawal of management guidance on business prospects.

Globalisation was already in retreat before this crisis, and problems with complex and distant supply lines will have a lasting impact on how companies plan for the future. Where all this leaves the future relationship between the Western World and China remains to be seen, although trust and goodwill appear to be in very short supply nowadays. Certainly this crisis has the potential to be a major set-back for US-China trade relations once negotiators return to the table. With the US election scheduled for the fourth quarter, and Trump’s position apparently weakened by his poor handling of the pandemic, investors will need to wary of his tweets. Equally, Brexit seems to have become almost a forgotten word, and while the UK government insists it is pressing on regardless, most observers believe an extension to the end December transition deadline is now inevitable.

April will also be remembered as the month when, for a short period of time at least, one measure of the oil price turned negative. With the collapse in global demand overpowering OPEC+ dramatic production cuts, oil storage facilities were fast filling up, and as the May contract for West Texas Intermediate Oil (WTI) came close to expiry, investors rushed to offload their commitment to take physical delivery at WTI’s hub in Cushing, Oklahoma. The crisis reached its peak with some poor souls having to pay over US$40 per barrel to extricate themselves from the contract.

Despite the volatility, global equities managed a spirited recovery, particularly in the early part in the month. In sterling terms, the MSCI AC World Index rose +9.1%. The US led the way with a +11.5% gain, followed by the emerging markets (+7.6%) and Asia ex Japan (+7.4%). Elsewhere, Europe ex UK (+4.6%), the UK (+3.6%) and Japan (+3.8%) also made gains, but were less buoyant. Sectors leadership was mixed, with cyclicals performing broadly in line with stable earners. Energy (+14.1%), consumer discretionary (+13.8%) and materials (+12.3%) performed well, alongside IT (+11.6%), communication services (+10.0%) and healthcare (+10.0%). In terms of style, growth (+10.8%) once again outpaced value (+7.2%), while smaller companies (+11.9%) did slightly better than larger companies (+9.1%).

Fixed income was generally helped by central bank quantitative easing, which pushed yields lower across most sub-sectors. Even though the JP Morgan Global Government Bond Index rose by +0.6%, it couldn’t keep pace with the recovery of  riskier corporate and emerging market bonds, which also benefitted from a general tightening of credit spreads. Over the month the ICE Merrill Lynch Global Corporate Investment Grade Bond Index rose +4.5%, the ICE Merrill Lynch Global High Yield Bond Index gained 4.4%, and the JP Morgan Global Emerging Market Bond Index delivered +2.0% (all hedged to sterling).

The Bloomberg Commodities Index fell -3.0%, although this masked considerable sector dispersion. Safe haven gold (+4.6%) and industrial metals (+0.8%) were the best performers, while crude oil (-25.1%) and agriculture (-7.0%) declined.

Under the circumstances, currency markets were relatively quiet, with the pound rising against the US dollar, yen and euro by +1.5%, +1.1% and +2.2% respectively. Elsewhere, worries about severe economic contraction saw the currencies of a number of the weaker emerging market economies continuing to lose ground against the pound, including the South African rand (-5.3%), the Mexican peso (-3.7%) and the Brazilian real (-6.9%).

Note: All monthly data is quoted in sterling terms unless otherwise stated.
INDEXLAST MONTH’S VALUETHIS MONTH’S VALUE
FTSE 1005671.965901.21
DJ Ind Average21917.1624345.72
S&P Comp2584.592912.43
NASDAQ7813.4999000.509
Nikkei18917.0120193.69
£/$1.2421.2594
€/£0.888230.86984
€/$1.10311.0955
£ Base Rate0.100.10
Brent Crude26.3526.48
Gold1577.181686.50

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we manage clients’ investments, please contact us on the same number as above. Or you can get in touch using the links to the forms towards the end of this page.

Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or security mentioned may be included in clients’ portfolios. They are referred to for information only and are not intended as a recommendation, not least as they may not be suitable. You should always seek professional advice before making any investment decisions.

about the author

Andrew Yeadon

Andrew Yeadon

Andrew joined in 2012, following 11 years with Schroders Investment Management, where he formed their multi-manager team. Prior to joining Schroders, Andrew spent 12 years at Brinson Partners (now part of UBS) where he progressed from graduate trainee to head of European equity strategy and portfolio construction.

 

His responsibilities include heading the London-based investment team, and chairing both the International Strategy Committee and the International Investment Committee. Andrew is also part of the international investment team for Nedgroup Investments, a sister company of Nedbank Private Wealth.

Access more of our insights

Investing

Weekly investment update

22 Sep

   |   4 mins

James Robertson reviews the week of 14 September, which was relatively quiet in markets, but resulted in varied performance across the different asset classes and another risk-off week for investors.

Investing

20 years on: déjà vu for tech stocks?

15 Sep

   |   9 mins

Rebecca Cretney reviews the slide in tech stock values, asking if this a repeat of the Y2K tech bubble bursting or if this is just due to current day events.

Investing

Weekly investment update

15 Sep

   |   5 mins

David McFadzean reviews the week of 7 September, where markets saw the trends in the first week of the month repeated, as investors remained risk averse.

Investing

8 October: our next quarter end investment webinar

11 Sep

   |   30 mins

David McFadzean is being joined by Andrew Yeadon to discuss the key events in Q3 markets, recent portfolio changes and what could happen before the end of 2020.

Get in touch

If you are interested in becoming a client, please complete the form via the ‘become a client’ button below. Alternatively, if you are already a client, or if you have a question about how we help clients in particular circumstances, please use the ‘contact us’ button.


We will get back to you as soon as we can during office hours, which are Monday to Friday, 8am to 8pm (UK time), except for UK public holidays.

Become a Client

Thank you for your interest in Nedbank Private Wealth. Please call us on +44 (0)1624 645000 or complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.

* Required fields

Contact Us

Give us a call today on +44 (0)1624 645000 or please complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.

Our office hours are weekdays from 8am to 8pm UK time, except for UK public holidays.

* Required field

Search suggestions