12th April 2021

It was another good week for stock markets, as they continued to be boosted on by good economic data and improving supplies of coronavirus vaccines. This led US shares to new all-time highs. Bond yields fell a bit lower on the week (helped by some soothing comments from the Chair of the Federal Reserve, Jay Powell), which helped growth shares to outperform value as the overall market continued to tick higher. This week brings a good amount of data for markets to focus on, with corporate earnings for Q1 being released and also some key Chinese data towards the end of the week.

Last Week

  • Stocks made good advances, with the US market clocking up new all-time highs.
  • The UK market continued to do well, with “re-opening” stocks performing well.
  • Bond markets were solid.
  • Gold rose on the back of strong inflation data.

This Week

  • There’s a fair bit to focus on this week, with the economy re-opening in the UK, a decent smattering of economic data and also the start of the Q1 earnings season.
  • On the data front, in the UK we have Industrial Production and Monthly GDP numbers out tomorrow. We also get US CPI numbers out on Tuesday and then Retail Sales and Initial jobless claims on Thursday. The week ends with a slew of data from China (on Friday): namely, Q1 GDP, Industrial Production, Retail Sales and Unemployment numbers.
  • Earnings season kicks off this week, with expectations set high. US banks (such as Goldman and Wells Fargo) report on Wednesday (along with Tesco in the UK) and then Thursday brings Bank of America, Citigroup and Deliveroo in the UK. Morgan Stanley and BNY Mellon report on Friday.

Last Week’s Highlights​

Stock markets continued to make good advances in a rather quiet and holiday-shortened week. Global stocks rose by 3% (helped by weakness in the Pound), whilst the UK FTSE All Share rose by 2.7%, taking its gains for the year to 8.6%. Within global markets, the US was particularly strong last week, rising by 2.8%; this was further helped by the Pound dropping by c0.9% vs the US Dollar, meaning that these gains got a further boost when translated back to Sterling.

In terms of sector performance, last week saw a reversal of the trends of 2021, with “growth” shares outperforming “value” by about 2%. However, the “value” style still remains comfortably ahead for the year-to-date, outperforming “growth” by c5.5%. Technology was the best performing sector, helped in no small part by the performance of Microsoft (+6.3%) and Apple (+8.9%), which constitute a combined 40% of the sector’s market capitalisation. Energy stocks were the weakest performing sector last week (down by 2.6%), although they remain one of the best performing sectors so far this year (second only to banks), up by over 16.6% for the period.

The UK market continued to do well, benefitting from good progress around “re-opening” and also a bit of weakness in the Pound, which boosted the Dollar earners in the FTSE 100 (about 70% of the earnings within this index are overseas). To this end, the FTSE 100 was the best performer, up by 2.7% on the week, with the FTSE 250 (more domestically focused) up by 2.5%. For the year-to-date, the FTSE 250 is marginally ahead, up by 9.2%, as compared to the FTSE 100, up by 8.2% and the FTSE All Share, up by 8.6%. Within the FTSE 100 index, JD Sports, Aveva and Persimmon were the best performing stocks (up by 11.2%, 10.3% and 9.2% respectively), whilst Flutter (-1.35%), Royal Dutch Shell (-1.3%) and Aviva (-0.9%) were the biggest laggards.

Bond yields fell slightly in the US and the UK which made for positive returns for these markets on the week. 10-year yields in the UK closed out the week at 0.77% and at 1.66% in the US. UK gilts rose by 0.35% on the week and US Treasuries rose by 0.4%. Both these assets remain firmly underwater for the year-to-date, with UK gilts down by 6.5%. Spreads contracted in both investment grade and high yield, which further helped to boost returns in these markets. UK investment grade spreads closed out the week at 1.12%, whilst Global High Yield index spreads closed out the week at 3.63%, making for gains of 0.4% and 0.6% respectively for these markets.

Strong inflation data saw Gold rise by 1.6% on the week and saw gold bullion close out the week at $1743/oz, which is within touching distance of its 50-day moving average level. Gold mining shares fared even better, rising by 5.1% on the week, and are now up by c13% from their levels at the end of February.

Economic data was generally pretty strong and was spurred on by the strong jobs data in the US which came out on Good Friday. This showed that 916,000 new jobs were added in March, which was a long way above the 660,000 consensus estimates and the biggest number we have seen since last August. We then saw the ISM services data rise to 63.7: the highest number on record. UK data was very thin on the ground last week, but what little data we did have was very much in a similar vein, with the composite PMI coming in at 56.4: broadly in line with what was expected and firmly in “expansionary” territory.

Amidst generally good data, there was also a report that showed evidence of higher input prices and inflation. The US producer prices index came in at 1% in March (roughly double what was expected) and took the year-on-year number to 4.2%: the highest since September 2011. This, combined with President Biden’s announcement the previous week of a $2.25 trillion infrastructure plan, helped boost expectations for growth and inflation.

Asset Returns

Equities & Oil: returns are all in base currency, save for Global and Emerging which are in GBP. Bond returns are all shown in GBP. Gold in GBP. Source Bloomberg.

Another new all-time high for the US stock market last week: now up over 9.5% so far this year and over 84% from the lows of last year.

Source: Psigma / Bloomberg

Rory McPherson
Head of Investment Strategy