Market Commentary April 2021

Global equities continued to rise in April, returning 4.3%, and the developed world looks well on the path to post-Covid 19 recovery.

Vaccine rollouts in the US and UK have continued to proceed well, with 44% and 51% of their respective populations having received at least one dose by the end of April and these proportions have continued to rise into May.

US equities delivered the strongest gains, up 4.9%, buoyed by encouraging economic data and business activity. The uptick in US service sector activity was the largest since 2014 and consumer confidence, while still below pre-pandemic levels, also rose.

Much of the positive animal spirits derived from President Biden’s policy measures, with a proposed $2trn infrastructure and manufacturing spending plan to follow up the previously tabled $1.9trn fiscal stimulus bill.

Finally, mention must be made of corporate earnings season, which saw spectacular gains from the large US tech firms. The combined revenues of Alphabet, Amazon, Apple, Facebook and Microsoft rose 41% in Q1.

It was these excellent technology earnings results that helped growth stocks lead the way in April, after several months of value outperforming. 

Other equity regions also delivered good gains – the FTSE All Share rose 4.3%, European stocks were up 4.2%, while emerging market equities increased 2.1%.

In the UK, the sector performance reflected the shift back to growth – with technology and healthcare stocks rising 6.8% and 6.6% respectively, while the energy falling $0.80. The strength of small and mid-cap stocks was again in evidence, and the FTSE-250 index hitting an all time high in the month.

Domestic UK stocks were buoyed by encouraging data as the country eased lockdown restrictions. The Office for National Statistics confirmed that UK retail sales had surged in March ahead of the lockdown easing, up 5.4% month-on-month and 7.2% year-on-year, well above expectations for 1.5% and 3.5%.

While equities continued to rise across the world, the sharp sell-off in developed market government bonds came to a halt. The Federal Reserve, which sets interest rates in the US, downplayed any prospect of removing policy support, helping the US 10y Treasury yield decline 11bps to 1.63%.

Corporate bonds produced positive returns and outperformed government bonds. Emerging market bonds also gained, as the US dollar weakened.

Finally, within the commodities world, energy prices rose although as noted earlier, this increase was not reflected in the performance of the oil stocks. Precious metals were modestly higher, with small gains for both gold and silver.