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5. April 2017 21:34
by Irene
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March 2017 - Market Commentary

5. April 2017 21:34 by Irene | 0 Comments

We have seen a good start to the year in equity markets and also the first rate rise of the year in the United States. Over the last quarter, a lot of the increase in markets has been geo-political in nature. While the confidence in the economic outlook has generally improved, the risks are currently being driven by politics far more than is usually the case. The most likely source of future volatility during the next quarter are the European elections and the on-going politics that will arise in the United States as competing factions debate how much fiscal stimulus will eventually be pushed through.

United Kingdom

And there is of course Brexit. The UK has triggered Article 50 and is now on a two-year deadline to agree payments to Europe, trade deals with Europe and the rest of the world, and whether it will remain a ‘United’ Kingdom. On top of that, inflation has surged, with last summer’s currency drop in Sterling finally filtering through to consumer prices with an accompanying drop in consumer confidence and slump in spending. The FTSE 100 though has still returned 1.1% for the month of March and is up 3.6% for the year.

Europe

In Europe, business surveys have risen to their highest levels in over five years and consumer confidence has recovered. The solid economic data has helped equity markets, accompanying reduced political concerns following the win of more centrist parties in recent elections in Austria and the Netherlands. The MSCI Europe Index has returned 3.3% in EUR for the month of March (2.6% in GBP) and 6.0% for the first quarter (5.3% in GBP). <

United States

The United States have seen their first rate rise for the year, but as it had been mostly priced in, the effects were subdued. Expectations are for two more rate rises to come this year. The S&P 500 took a breather over the month, returning just 0.1% in USD (-1.2% in GBP). Partly this has come on the back of fears that fiscal stimulus might not be as easy to be pushed through as was hoped first, despite the fact that the Republicans are controlling both houses in the US.

Emerging Markets

Besides Europe, Emerging Markets have been the other winners for the month, with the MSCI Emerging Markets Index returning 2.5% in USD (1.1% in GBP) and 11.4% for the first quarter (9.6% in GBP). This was supported by a weaker US Dollar, an increase in global growth and stable economic data from China, and the signal of a gradual profile of tightening in the US. Japan has seen a fairly positive outlook as well, with falling unemployment and a positive sentiment from businesses, but the latest strength in the Yen over the last three to four months, however, has not helped Japanese equities.

Fixed Income

Government bonds were more or less flat in the US, Eurozone and the UK, and corporate bonds followed suit. Emerging Markets sovereign bonds showed a similar behaviour for March, returning just 0.3% in USD, although this number stands at 4.0% for the first quarter (2.0% in GBP).

Commodities

Oil has been at the bottom of the leader board in March, falling -7% in USD. Gold on the other hand was down only -0.9% in USD, although it returned 8.6% over the first quarter (6.1% in GBP).

Market Returns Overview


Source: Markit, Twenty20 Investments, as of 31 Mar 2017, all returns in GBP.

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