Openwork Market Review – March 2021

March was a positive month for global equity markets to end a positive first quarter of 2021.

Vaccine optimism has led to hopes that pandemic restrictions could be lifted around the world before too long, giving a boost to the global economy.  That optimism however has been tempered by concerns that a recovery could give rise to inflationary pressures, which has in turn pushed bond yields higher, especially in the US.

This has been particularly evident in the major equity markets in the United States.  The Dow Jones 30 and the S&P 500 climbed 6.6% and 4.3% respectively in March, posting their best month since November 2020 and their fourth positive month in five.  For the quarter, the Dow Jones 30 was up 7.8% and the S&P 500 rose 5.8%.

In comparison, the Nasdaq was the relative underperformer as technology stocks are especially sensitive to rising rates because they depend on borrowing money cheaply to invest in their future growth.  For March, the Nasdaq gained only 0.4% and it was up 2.8% for the quarter.

  Monthly performance to end of March 2021
FTSE 100 (UK) +3.6%
Dow 30 (US) +6.6%
Euro Stoxx 50 (Europe) +7.8%
Nikkei 225 (Japan) +0.7%

In terms of currency, £ Sterling ended March at 1.38 US Dollars.  This was 1.1% lower than the figure at the end of February. Against the Euro, £ Sterling ended March at 1.17 Euros, which was 1.8% higher than the February closing figure.

Inflation, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH) was 0.7% in February 2021 (this is February’s data which is reported in March).  This was down from 0.9% in the previous month, largely as a result of falling prices for clothing, second-hand cars, and games, toys and hobbies.  The 12-month rate for the Consumer Prices Index (CPI) rate which excludes owner occupied housing costs and council tax was 0.4% in February, down from 0.7% in January.

There were no further changes to the Bank of England base rate last week following the two previous cuts in March.  The current rate remains at 0.1%.

With the world continuing to fight coronavirus despite the first tentative steps to ease some restrictions as a result of the successive global roll-out of vaccines, we believe that global equity markets are likely to remain volatile for some time.  So, it is increasingly important to understand your attitude to risk, capacity for loss and investment objectives.