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A Month In the Markets - March 2020

In a month where global news has been anchored to coronavirus, March saw governments and central banks introduce policies and measures to try and mitigate the economic damage caused by the virus.
Monthly markets update
Reading time: 8 mins

In a month where global news has been anchored to coronavirus, March saw governments and central banks introduce policies and measures to try and mitigate the economic damage caused by the virus.

In the UK, there was increased government spending aimed at supporting companies and their employees. This was reinforced with the Bank of England cutting interest rates twice in March, first from 0.75%, to 0.25%, and then to 0.10%. The reduced interest rate has been implemented to allow for cheaper financing for companies and consumers during these uncertain times.

Across the Atlantic, we saw the US follow a similar pattern with their central bank, the Federal Reserve, which cut interest rates from a range of 1.50-1.75% to 1.00-1.25% at the start of March, followed by another cut to 0.00-0.25% towards the middle of the month.

In the Eurozone, interest rates are already at -0.5%, which gives very little room to manoeuvre. As we’re expecting global economic growth to take a downturn, the Euro will need more government spending support, and currently, Germany is leading the efforts on this.

However, these measures will only cushion coronavirus’ economic impact, not eliminate it.

In March, every global stock market ended the month lower due to the impact of coronavirus. But it was encouraging to see markets reacting positively to the unprecedented levels of government support.

The FTSE 100, representing the UK’s largest public companies, dropped by -13.40% in March, although it was down -25.56% at one point. This decrease was primarily driven by financial and commodity focussed companies.

Only 12 of the 100 stocks in the FTSE 100 delivered positive returns, with J Sainsbury’s, Ocado Group, and Wm Morrisons featuring in those top 12. This is largely due to supermarkets and online delivery companies continuing to see increased business during the pandemic. 

US shares, as measured by the S&P 500 stock market, declined -12.35%. It was a similar story to the UK stock market, where financial and commodity companies led the decline. However, being a technology-heavy market, Apple, Google, and Facebook led the market lower. Again, there are some companies that are performing strongly in this environment, with Amazon, Netflix, and Walmart finishing the month higher.

Asia ex Japan (-12.07%), Emerging Markets (-12.07%), Europe (-16.87%) and Japan (-9.76%) also suffered large declines.

In March, we saw the pound decline further against the euro (-3.29%), Japanese yen (-3.58%), and the US dollar (-3.24%). However, since the UK government stepped up its measures to combat the virus, the pound has rallied by 8.13% versus the US dollar, suggesting a renewed confidence in the government’s actions.

Investment type performance breakdown
It was another difficult month for investment types, with property (-19.94%) declining the most from the previous month as concerns spread to the property market. Bonds were also down (-0.60%) in March, albeit marginally, and shares sat in between bonds and property, ending the month down by -10.44%.

Summary with Plan details
Similar to investment types, the performance for our Plans this month was negative. Plans that own more bonds delivered marginal negative returns, whilst Plans that own more shares saw greater negative returns, reflecting the current state of global stock markets.

Our investment team are actively keeping an eye on your Plan and the financial markets. We rebalanced your Plans twice in March to make the most of the opportunities that arose from movements in global markets. In our first rebalance, we sold government bonds that had amazing returns, banking profits, since January. For example, our US government bond fund had returned over 7% at the time of rebalance. The proceeds of this sale were invested in property and shares at attractive prices due to the virus, with some of the proceeds remaining in cash. Our second rebalance added to currency-hedged global shares. We did this to add protection from a strengthening pound while it was at multi-decade lows versus other currencies. We will continue to make changes to your Plan as and when necessary. Until then we remain patient and ready to act to any events that unfold.


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