March 2021 continued to build on the progress made by the vaccine roll-out so far this year, seeing cases continue to fall in the UK. With summer just around the corner and restrictions slowly lifting as part of the UK’s gradual planned reopening, the outlook is feeling more positive every week.
That said, new lockdowns are taking place across Europe where cases are beginning to rise, and there’s a threat of another wave. European stock markets, however, continued to build on the positive start to 2021.
US President Joe Biden announced a $2 trillion (around £1.5 trillion) investment into infrastructure, designed to create several million infrastructure-focused jobs. Markets responded positively to this announcement, although despite the addition of 14 million jobs added, there’s still 8 million fewer people employed in the US than there was pre-covid. This was even after the positive March release, which showed the addition of 379,000 jobs in February and a decrease in US unemployment to 6.2%, the lowest post-Covid level so far, it is still above the 3.7% average of 2019.
Data released in March showed the UK’s manufacturing sector grew at its fastest pace in over a decade. Eurozone manufacturing also recorded its fastest growth rate in the 24-year history of the data.
March was generally positive, with developed markets performing well. Europe (+6.07%), Japan (+4.56), US (+4.24%), FTSE-100 (+3.55%) and FTSE-250 (+2.91%) all saw gains. Asia Pacific excluding Japan (-2.30%), and Emerging Markets (-1.70%) lagged behind due to concerns of increasing vulnerability to rising US bond yields (yields rise when bond prices fall). This comes after strong period of performance for these regions on the back of China’s swift economic recovery from the pandemic.
The gains in most assets held in foreign currency were lessened in our Plans due to the strength of Sterling. However, this was not the case in the US, where Sterling weakened against the US Dollar, which we’ll discuss below.
Sterling continued to benefit from optimism due to the advanced pace of the UK’s vaccine roll-out. This saw sterling rise against the euro (+1.80%), and Japanese yen (+2.70%) – this means that assets held in these currencies didn’t benefit as much when looked at in Sterling. As the US economic outlook improved, Sterling weakened against the US dollar (-1.09%). This was reflected by the US 10-year Treasury bond yield increasing to 1.75%, as bond prices fell due to rising inflation expectations and the expectation of a stronger recovery.
Investment type performance breakdown
Shares rose (+3.28%), but their performance was dampened slightly by the general rise in Sterling. Expectations about accelerating inflation continued to support the property sector (+3.07%), but inflationary fears saw bond prices dip (-0.52%).
Summary with Plan details
Our Plans with a higher allocation to shares and property, such as our Adventurous Investment Style, benefited from the positive returns from these asset classes in March. While Plans that hold more bonds, such as our Cautious Investment Style, would have seen the growth in shares and property somewhat offset by the decline in bonds.
Our Investment Team continue to actively monitor the financial markets and their impact on your Plan, and as always, we are ready to act in your best interests to events as they unfold.
Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.