Global markets got off to a steady start in 2021 after the volatility of 2020.
After an interesting first quarter in 2020, one year on markets have had a much quieter first three months in 2021, as the graph above shows. The UK, as measured by the FTSE 100 appears to remain a laggard, but that ignores the recent strength of sterling. Allow for that and the 3.9% rise in the FTSE 100 is better than the MSCI All-World performance of 3.2% in sterling terms. Similarly, the standout 10.3% rise of the Euro Stoxx 50 on the graph drops to just 2.1% when adjusted for the change in £/€ exchange rate.
A summary of the movements in the main markets is shown below:
31/12/2020 | 31/03/2021 | Change in Q1 2021 | |
FTSE 100 | 6460.52 | 6713.63 | 3.92% |
FTSE 250 | 20488.3 | 21518.71 | 5.03% |
FTSE 350 Higher Yield | 2893.08 | 3106.46 | 7.38% |
FTSE 350 Lower Yield | 4291.83 | 4335.49 | 1.02% |
FTSE All-Share | 3673.63 | 3831.05 | 4.29% |
S&P 500 | 3756.07 | 3972.89 | 5.77% |
Euro Stoxx 50 (€) | 3552.64 | 3919.21 | 10.32% |
Nikkei 225 | 27444.17 | 29178.8 | 6.32% |
Shanghai Composite | 3473.07 | 3441.91 | -0.90% |
MSCI Em Markets (£) | 1767.417 | 1785.206 | 1.01% |
UK Bank base rate | 0.10% | 0.10% | |
US Fed funds rate | 0.00%-0.25% | 0.00%-0.25% | |
ECB base rate | 0.00% | 0.00% | |
2 yr UK Gilt yield | -0.17% | 0.10% | |
10 yr UK Gilt yield | 0.19% | 0.85% | |
2 yr US T-bond yield | 0.12% | 0.16% | |
10 yr US T-bond yield | 0.92% | 1.75% | |
2 yr German Bund Yield | -0.71% | -0.70% | |
10 yr German Bund Yield | -0.57% | -0.30% | |
£/$ | 1.3669 | 1.3797 | 0.94% |
£/€ | 1.1172 | 1.1739 | 5.08% |
£/¥ | 141.1299 | 152.4559 | 8.03% |
A few points are worth noting from this table:
The out-performance of the FTSE 350 Higher Yield over its Lower Yield counterpart is a reflection of the trend towards value. It is mirrored in the USA where the more heavily tech-weighted S&P 500 underperformed the Dow Jones Industrial Index by 2%.
Emerging markets were relatively disappointing in Q1, dragged down by China and rising US bond yields.
Increasing bond yields were a notable feature of the quarter. Although base rates were unmoved and 2-year Government bond yields little changed, 10-year yields rose sharply. There is now talk of the 2% barrier being breached for 10-year US Treasuries before the end of the year – more than double the starting level.
While the first quarter had its fair share of ups and downs, as the graph shows, the rise was more of a churn upwards than a straight trend. How long markets can continue to rise if bond rates continue to do the same is the point to watch in the coming three months.
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Source: Techlink
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