Global equities rose and Government Bond prices fell during March as investors continued to adapt to higher growth and inflation expectations. The global economy was reinforced by President Biden’s $1.9tn stimulus package and the announcement of a further multi-trillion infrastructure plan during the month. In the US, the 10-year Bond yield moved from a low of 1.38% to a high of 1.78% despite the US Federal Reserve’s emphasis that it will maintain low policy rates through to 2023. As a result, the JPM Global Bond Index fell -0.7% over the month and is down -9.2% over the last year. Although the return on the FTSE Actuaries UK Conventional Gilts All Stocks index was 0.0%, it belies the intra month volatility over the month. Nevertheless, over the last year to end March the index has declined -5.5%. Sterling gave up some of the gains it made during February in March, leaving the GBP/USD exchange rate at 1.38 (GBP/USD) at month end.
Many western central banks and economic organisations increased their outlook for Growth over the month, focussing on the rapid pace of the vaccine roll out in developed nations rather than the possibility of a further wave of Covid-19 cases and variants. The MSCI World index rose by 4.2%, however intra sector price volatility was high during the month, particularly in the Technology and high growth sectors.
Despite the slow rollout of Covid-19 vaccines Europe was the best performing region in March (after falling behind in January/February), returning 6.7% over the month. Italian and German markets led over the month with the best performing sectors being Auto’s (17.7%), Household Goods and Construction (17.3%) and Industrial Metals and Mining (14.5%).
The S&P500 returned 4.3% over the month, with Utilities (10.4%), Industrials (8.9%) and Consumer Staples (8.0%) the best performing sectors. Energy (2.8%) and Information Technology (1.7%) were the poorest performing sectors, with the NASDAQ 100 producing a return of 1.5% over the month. Over the past 3 months the NASDAQ 100 has underperformed the MSCI US Value index by 8.4%. This relatively poor performance has resulted in the US Technology sector seeing net weekly outflows for the first time since September last year.
The UK market continues to perform well with the FTSE 100 returning 4.2% and FTSE All Share 4.0% in March. Telecommunications (11.8%), Consumer Staples (9.7%) and Utilities (7.7%) were the best performing sectors during the month. Energy (-1.8%) and Basic Materials (-2.2%) were the poorest performing sectors in March but have been the best performing sectors over the past 6 months. The Energy sector is closely linked to the Oil price and Brent Crude declined -1.8% in March. Over the last 6 months the UK region has been the best performing region, with the FTSE 100 (16.4%) and FTSE All Share (18.5%) outperforming the MSCI World by 4.4% and 6.5% respectively over this period.
Asia Pacific ex Japan and Emerging Markets both fell during March, but both regions have performed well over the last 6 months, up by 14.7% over the period. The main detractor for both regions being China which fell -6% over the month resulting in the MSCI Asia Pacific ex Japan index falling by -1.2% and MSCI Emerging Markets -0.9%.
Chief Investment Officer