April’s investment market commentary

April was another good month for the riskier assets. Despite concerns of rising COVID-19 cases around the world (and especially in India), equity markets continued their rise, with most of the major indices reaching new all-time highs. Investor sentiment was supported by encouraging signs of an economic recovery, continued central bank support, and greater government spending in the United States.

The US Federal Reserve (Fed) reiterated in April that they were in no hurry to raise interest rates, despite rising inflation. The Fed’s focus at this time is on supporting the economy in order to reduce unemployment, with the upward pressure on prices being currently viewed as temporary or ‘transitory’.  This narrative has been a tailwind for markets, but it may be tested over the months ahead if inflation is much stronger than expected. Staying with the US, President Biden unveiled further details regarding his ambitious US$2 trillion spending plan to rebuild US infrastructure. What will actually get through, and how it will be paid for, remains up for debate in Congress. Nonetheless the sheer size of the plan is impacting markets.

Commodities have been one beneficiary of Biden’s infrastructure plan, especially copper. The metal has risen strongly in value this year, increasing in April to its highest level in a decade. It was aided by hopes of a global economic recovery, like most commodities, but also by the potential of additional spending on clean energy and infrastructure.

Bond markets were generally supported by the Fed’s defacto ‘lower for longer’ message, with US government bond yields falling (prices rising) over April. In addition, credit markets also performed well with risk assets generally in favour.

Finally, in terms of currencies the US Dollar was broadly weaker in April than in March, again reflecting the Fed’s dovish stance on interest rates despite rising inflationary pressures. The US Dollar fell against most developed and emerging market currencies, with the notable exception of the Indian rupee, as the country experienced the highest rise in COVID-19 cases globally.

This month’s values quoted as at 30/04/2021. The above values are sourced from Bloomberg and are quoted in the relevant currency.

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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 here may not be suitable, and is included for information only and is not a recommendation. You should always seek professional advice before making any investment decisions.