Publications -

Viewpoint – November 2021

The buoyant markets of October continued through most of November, taking several equity indices to new all-time highs, until news of the new Covid variant, Omicron, at the end of the month reverberated globally and sent equity markets into their sharpest one-day falls of 2021, pushing all major markets into negative territory for the month.

Viewpoint – October 2021

The abrupt fall in markets in September was equally abruptly reversed in October, with Wall Street enjoying its best month of the year, the S&P 500 returning 7.0% and closing the month at an all-time high. Other markets generally made progress, but could not keep pace with the US; the only major market to fall was Japan, down 1.4% in local currency terms (-3.8% in USD terms), reversing some of its strong outperformance of September in the face of uncertainty ahead of the general election on 31 October. Emerging markets continued their run of underperformance, returning 1.0% in USD terms in October compared with 5.7% from developed markets, leaving their year-to-date returns at -0.3% and 19.4% respectively. However, stripping out the top performer of the major markets, the US, from the MSCI World index, and China, the weakest of the large markets, from the MSCI Emerging Markets index, paints a rather different picture, with returns much closer together. China stabilised in October but has fallen by 14.0% so far this year as its problems, some self-inflicted, mounted.

Viewpoint – May 2021

Confidence in economic recovery continued to mount in May, with most data and forward indicators pointing to a period of exceptional growth underway. Confirmation from data releases and empirical evidence that this is being accompanied by a sharp rise in inflation caused some investor nervousness during the month, but dovish signals from the Federal Reserve assuaged those concerns and underpinned a continuation of the reflation trade in markets while, somewhat surprisingly, holding bond yields in check.

Viewpoint – April 2021

The pandemic continued to dominate discourse in April as case numbers globally reached record daily levels, but the impact became increasingly differentiated between the developed world, where the vaccine roll-out is bringing herd immunity and the end of lockdowns and movement restrictions into sight, and developing nations, notably India and Brazil, where second waves have spread rapidly with devastating effect and vaccine roll-out is trailing badly. However, the global dominance in both GDP and stock market capitalisation of the developed world together with China, which was the earliest economy to rebound from the pandemic, has underpinned growing confidence in recovery and the prospects for equity markets. The US and global equity market indices reached new all-time highs in April, with the S&P 500 up 5.3% and MSCI World +4.7%. Emerging markets were more constrained by the pandemic news, and by further evidence of China’s widening clampdown on its internet giants as both Tencent and Meituan were hit with anti-trust investigations following a similar move on Alibaba. The MSCI Emerging Markets index returned 2.5% in the month, with China +1.4%.

Viewpoint – March 2021

While the vaccine news in early November was arguably the critical turning point in this cycle, providing light at the end of the pandemic tunnel, it was only in the first quarter of 2021, 12 months from the pandemic’s onset, that investors began to price in the recovery ahead and a return to post-pandemic normality. The recovery and reflation trade took hold, manifest most clearly in sharp falls in bond markets, suffering one of their worst quarterly returns in decades, and in a big rotation in equity markets, from the pandemic winners, in e-commerce, the digital and online world, to those sectors which have suffered most from lockdowns and restricted mobility. Over the quarter, global equities returned 4.9%, but within that, the sectors most sensitive to economic recovery produced substantial returns, including energy +22% and banks +19%, while those which had benefitted from the pandemic, such as IT, healthcare and consumer staples, were flat.

Viewpoint – February 2021

One year ago coronavirus began to ravage the global economy and stock markets. The ensuing recession was the worst since the Great Depression, yet over those 12 months global equities have returned almost 30%, despite a 35% decline in the initial few weeks of the pandemic. Emergency policy support on an unprecedented scale underpinned markets, more recently turbo-charged by the extraordinary success of the vaccine development and roll-out programme. The narrative has moved to the scale of the economic recovery ahead and its implications for inflation: the reflation trade has been gathering pace and came to dominate markets in February.

Viewpoint – January 2021

The surge in markets in late 2020, triggered by the positive vaccine news, Biden’s success in the US election and the favourable settling of the UK-EU trade negotiations, continued into the new year. Equity markets made a strong start while government bond yields rose. However, optimism waned as January wore on, concerns rising about Covid mutations, the pace of vaccine roll-out, especially in the EU, and the economic damage caused by tightened and extended lockdowns across many parts of the world, most notably Europe. By month end, expectations for a sharp economic recovery had been pushed out to later in 2021. Sentiment was also impacted by the bizarre antics of retail traders in the US driving heavily shorted stocks to nonsensical heights in an attempt to inflict damage on hedge funds, an investment tactic that could only lead to misery for many of those involved.