May 04 2021

The first quarter of 2021 quarter saw the continuation of last quarter’s valueled equity market rally, driven by a confluence of geopolitical and macroeconomic factors largely (but not entirely) related to the success of Covid vaccination roll-outs.

The UK and US have led the developed Western economies in inoculation numbers, with 58% of British adults now having received at least one dose of a vaccine and supply only strengthening through 2021 as more production comes online. Case and hospitalisation numbers have plummeted, and the roadmap to normalisation if anything now looks too conservative.

The US has given 37% of adults at least one dose, with President Biden’s successful $1.9tn stimulus package adding more fuel to the recovery story. The package’s passing was helped by the Democrat victory in Georgia’s Senate run-offs at the start of 2021 – a result that meant the Democrats have control of Congress by a wafer-thin margin.

With this good news came rising global government bond yields, as investors priced in a less accommodative monetary policy environment due to improved growth outlooks. The 10-year US Treasury yield now stands at around 1.75% versus a low of 0.50% in August 2020, and 0.90% at the start of 2021, with other developed market government bond yields have moved upwards similarly sharply.

This recovery story played strongly to the outperformance of value equities over their growth counterparts over the quarter, with higher bond yields and commodity prices helping financial, materials and energy stocks; many of which fall into the cheaper value space. The chart below shows the effect of this at the global level, with the MSCI ACWI Value Index rising by 7.86% in Pound terms, but the Growth Index falling by 0.64%:

MARKET UPDATE Q1 (003).jpg

At the broad index level, UK equities again were top performers, joined at the top of the table by US equities. Both regions rose by around 5% over the quarter. Asian and Emerging Market equities took a breather after a strong start to year; we think Asia in particular presents excellent growth opportunities over the medium term:

MARKET UPDATE Q1 (003)2.jpg


News flow is still dominated by Covid but as before, our base case is for a gradual normalisation through 2021. Risks remain to the downside related to vaccine efficacy and policy execution but thus far they have been well-marshalled despite notable setbacks in Europe.

The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The views expressed in this publication represent those of the author and do not constitute financial advice.

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For further information, please contact:
Andrea Barker
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