Week ending 26th March 2021.

After a challenging start to the week, global equity markets recovered strongly today (Friday 26 March 2021), and as a result ended the week marginally higher – and the reasons show how fickle equity markets can be in the short-term and why it was important to resist the urge for any knee-jerk reactions and maintain a long-term perspective.

Equity markets fell at the start of the week, predominately due to geopolitical concerns following a coordinated action to sanction several Chinese officials for human rights abuses against Uyghur Muslims.

However, while sanctions on individuals make for great front page news stories, from an equity market standpoint, it has very little impact.

In fact, it was quickly forgotten once the Fed announced it was lifting dividend and buyback restrictions on US banks, coupled with Joe Biden’s doubling of the US vaccine rollout target – and as we have previously said, a quick vaccine rollout will allow the global economy to reopen, and more importantly, stay open.

Adding to the optimism was a slightly better than expected increase in UK retail sales and the lower core PCE reading (the Fed’s preferred US inflation measure) – and while we fully expect headline inflation to rise rapidly in the coming months due to the pass-through of last year’s distorted oil price, today’s core PCE reading (which excludes volatile items such as food and energy), clearly highlights that inflation is not starting to run away.

Looking ahead, although it is a shortened week due to the Good Friday bank holiday, not only is there still plenty of economic data readings due (with the most important announcement due on Good Friday), but we also hope to hear more from Joe Biden on his infrastructure spending plans (which is expected to be massive).

For us, the main focus of the week is Friday’s (2 April 2021) US employment data (non-farm payrolls; unemployment rate; participation rate; and average earnings).  Other important data releases from the US include consumer confidence on Tuesday (30 March 2021) and jobless claims on Thursday.  Elsewhere we will be focusing on Eurozone CPI inflation; Chinese PMI; and Japanese industrial production.

Investment Management Team

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