Market Overview – April 2021

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Market Performance April 2021 and your investments

Global equities generally had a positive month despite the spread of COVID-19 remaining firmly in focus. Vaccination rollouts continued across the world, but rising cases in many regions, particularly India and Japan, raised fears of a new wave.

Inflation data has been closely scrutinised but so far done little to spook markets. The UK’s 12-month CPI rate rose to 0.7% for March, albeit being below consensus estimates. US inflation increased by 0.6% on a seasonally adjusted basis in March, after rising 0.4% in February and marking the largest rise for the CPI since August 2012. However, markets were relaxed as Federal Reserve Chairman Jerome Powell’s confirmed the central bank can reinvigorate the economy without spurring inflation.

More Stimulus, More Highs:

  • With the ink barely dry on his coronavirus bailout bill, President Biden unveiled the $2.2 trillion “American Job Plan” to invest into the country’s ageing infrastructure.
  • Speaking of the plan, Biden said “everyone will benefit” and that it would create upwards of 19 million jobs, mostly for working class Americans.
  • The plan is being billed as the most sweeping economic investment since the original U.S. space programme. The White House plans to fund the bill by taking back some of the tax cuts Republicans put through four years ago.
  • Overall positivity around this sent the S&P 500 Index through the 4,000 milestone for the first time

UK Equities Back on Track:

  • The UK enjoyed an easing of restrictions thanks to the continued success of its vaccination rollout. Economic data showed the economy returned to growth despite lockdown restrictions being in place for parts of the periods covered.
  • Surging commodity prices driven by the reopening of economies has also been a big positive for UK markets and the topflight FTSE 100 broke through the 7,000 level for the first time since February 2020.
  • Exports to the EU recovered significantly from their January fall, but still remained below 2020 levels.

Vanishing Oil Glut:

  • Of note in the commodities market is that the huge oil inventory glut amassed during the pandemic has virtually gone. Limited production from OPEC and rising demand as economies reopen has resulted in less than one fifth of the surplus remaining, according to the International Energy Agency. This has kept crude prices elevated which has been great for oil producers but acted as a concern for motorists and any government wary of inflation.

Summary

There will undoubtedly be further volatility across markets as each region continues to deal with the impact of COVID-19 and finds its own pathway back to economic growth. Our investment partners remain confident in the highly diversified nature of our current holdings and are particularly aware of the risks that rising bond yields and inflationary concerns pose to markets.  Their view remains that one of the best ways to protect against many of these sharp movements in sentiment is to continue to retain acceptable levels of diversification and liquidity across assets. And while we all welcome the apparent complacency in markets currently, we are not expecting to write off the impact of COVID-19 just yet.