May 2021 saw the number of new Covid cases globally decline following April’s peak but numbers are still higher than during February’s lull. Further strides are being made towards normalisation as the global vaccination roll-out is accelerated further, particularly in Canada and the European Union, which had previously been lagging.
Data released in May showed that, globally in April, manufacturing has continued to perform well, although supply-chain issues are causing price pressures. Our current expectation is that these will be temporary bottlenecks that we’ll see as part of the reopening of the global economy – similar to what we’ve experienced with microchips. The service sector has also continued to recover particularly quickly due to the lifting of restrictions which has allowed the hospitality industry to safely resume operating. The recent loosening of restrictions in the Eurozone has been particularly supportive here.
Economic data continues to reflect the level of Covid restrictions in place. For example, last month, physical retail outlets were permitted to reopen, and the UK’s retail sales leapt 9.2% month-on-month.[1] UK house prices, at 10.9% year-on-year, saw the strongest price increase since mid-2014 as buyers sought to take advantage of the forthcoming end to the Stamp Duty holiday in England, Wales, and Northern Ireland.[1] However, US employment data was less encouraging with only 266,000 jobs added in April against economists’ forecast for 1,000,000. Lack of childcare support, more generous than usual unemployment benefits, and caution amongst some workers about returning to the office were seen as mitigating factors.
While some inflation data was stronger than expected, notably in the US, market expectations have eased somewhat. This will provide comfort to Central Banks as their focus remains on underpinning the economic recovery, with a short-lived inflation increase above their 2% target level tolerable.
Markets
While concerns weighed on equities in the first half of May, continued improvement in the vaccine rollout and economic data saw all major markets end the month positively. Europe (+2.14%) and Emerging Markets (+2.12%) led, followed by Asia Pacific excluding Japan (+1.20%), FTSE-250 (+0.83%), FTSE-100 (+0.76%) and US (+0.55%). The gains in foreign currency were decreased in our Plans due to the strengthening of Sterling. We will discuss this further below.
Currency
Continued robust economic data in May, coupled with a further momentum in the UK’s vaccine rollout saw the British pound rise against all major currencies. The pound rose against the Euro (+1.07%), US dollar (+2.74%) and the Japanese yen (+2.98%).
Investment type performance breakdown
Shares saw little change (-0.12%) as their performance was hindered by the general strengthening in Sterling against major global currencies. The property sector eased (-0.27%) after a strong performance in April (+5.48%). Bonds were also little changed (+0.10%) as inflationary concerns eased marginally.
Summary with Plan details
Overall, our plans saw little change in May. Those Plans with a higher allocation to shares and property, such as our Adventurous Investment Style, saw a mild easing in May. Plans that hold more bonds, such as our Cautious Investment Style, would have seen a marginal improvement as the growth in bonds offset the decline seen in shares and property.
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.
1. Data from Bloomberg
