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March Market & Economic Update by Tilney’s Ben Seager-Scott & Louie French

Welcome to our latest market and economic update, which looks back over the month of March 2021.


Global markets ended the first quarter of 2021 in positive territory, despite concerns regarding rising global Covid-19 cases in certain regions towards the end of March.

Against this backdrop, global equity market returns were positive over the month, with developed market equities outperforming Asian and emerging market equities. European equities were notably strong, supported by a weaker month for the euro.

Global fixed income markets were relatively firmer in March, to end what was a challenging first quarter as government bond yields rose. After a strong start to 2021, commodities were weaker in the month against a stronger US dollar, but still delivered bumper returns overall in the first quarter.


In the latest chart of the month, we highlight the outperformance of the value-orientated parts of the market over the first quarter of 2021.

On a total return basis, global equities delivered another positive quarter of returns for investors over the first quarter of 2021. However, the headline index returns do not tell the full story, with value significantly outperforming growth in the period, as inflation and interest rate expectations rose in anticipation of further stimulus from President Biden.

This market backdrop was supportive of companies in sectors such as banks and energy, which are generally more cyclical and exposed to the global economy. As a result, value has significantly underperformed growth over the past decade and some company valuations were looking cheap on a relative basis.

How long this value rally will last is yet to be seen, but our core view remains that high-quality companies with good growth prospects will outperform over the longer term.


  • March was a strong month for US equities as the MSCI USA index returned 3.7% in US dollar terms and 5.1% in sterling terms. The mood was helped by President Joe Biden signing the $1.9 trillion stimulus package into law, as well as a decidedly dovish tone from the Fed which projected no rate hikes through to the end of 2023 despite rising longer term rates and building inflationary expectations.
  • UK equities also rose on the month, with the MSCI United Kingdom index up 4.1% helped by the continued vaccination rollout and optimism in some of the economic data releases including unexpectedly strong readings from the Purchasing Manager Index business surveys and a gradually improving employment situation.
  • In Europe, the MSCI Europe ex-UK index gained 6.7% in euro terms, with currency effects cutting this to 4.7% in sterling terms. At a country level, Sweden led the way, gaining 8.8%, followed by Italy on 8.2%, the Netherlands on 7.9% and Germany on 7.5%. Conversely the laggards included Denmark returning 3.6%, Spain gaining 3.8% and Switzerland on 4.9% (all MSCI indices in euro terms).
  • Overall for the quarter and in sterling terms, the MSCI United Kingdom returned 5.2%, MSCI USA returned 4.5% and MSCI Europe (ex-UK) returned 2.7%.


  • It was a tougher month for Asian and Emerging Market equities. MSCI Asia Pacific excluding Japan fell -2.1% in US dollar terms (-0.8% in sterling terms) whilst the MSCI Emerging Markets index fell -1.5% in US dollar terms (-0.2% in sterling terms) over the month.
  • At the major country level and in US dollar terms, China was the worst performer, with the heavily-weighted MSCI China index down -6.3% and dragging on the broader regional indices. Conversely, most other major countries were positive, with MSCI South Africa gaining 5.6%, MSCI Russia up 5.2%, MSCI Brazil up 3.3% and MSCI India up 2.7%
  • The MSCI Japan index returned 5.0% for the month in local currency terms, and 2.5% in sterling terms.
  • Overall for the quarter and in sterling terms, MSCI Japan returned 0.8%, MSCI Asia Pacific excluding Japan returned 1.8% and MSCI Emerging Markets returned 1.4%.


  • Global fixed income markets were relatively firmer in March to end what was a challenging first quarter as government bond yields rose on investor expectations of a strong economic recovery and further fiscal stimulus from the Biden administration.
  • On a total return basis and in local currency terms, US treasuries returned -1.1% in March, while German bunds and UK gilts were flat. For the first quarter overall, US treasuries returned -4.5%, German bunds -2.4% and UK gilts returned -7.2%.
  • Unsurprisingly given the backdrop, credit markets were also weaker over the first quarter, with Bank of America analysis highlighting Q1 2021 as the worst first quarter for investment grade credit since 1980
  • On a total return basis and in local currency terms, investment grade sterling corporates returned -0.4% in March and global high yield returned -0.6%. For the first quarter overall, investment grade sterling corporates returned -4.5% and global high yield returned -0.1%, highlighting a more favourable backdrop for high yield.


  • The US dollar was notably strong again in March, as investors started to price in potential rate hikes from the US Federal Reserve despite the Fed’s cooling rhetoric. In US dollar terms, the euro declined -3.2%, the Japanese yen -3.6% and sterling -1.3%.
  • The broader US dollar index returned +2.6% over the month and +3.7% over the first quarter, which is the best quarterly performance since Q2 2018.
  • The relatively successful vaccine rollout in the UK helped sterling to appreciate against most major currencies in the first quarter of 2021. In sterling terms, the euro returned -4.8%, the Japanese yen returned -7.4% and the US dollar returned -0.9%.


  • After a strong start to the year, global commodity markets experienced a weaker end to the first quarter, as a strong US dollar and concerns over a rise in global Covid-19 cases led to further restrictions, weighing on sentiment.
  • The two headline indices, the Bloomberg Commodity and the S&P GSCI, both returned -2.1% on a total return basis in US dollar terms over the month. In sterling terms, the returns were -0.8%.
  • For the first quarter overall, global commodity markets delivered positive returns for investors. The Bloomberg Commodity and the S&P GSCI indices returned +6.9% and +13.6% on a total return basis in US dollar terms.
  • At the sector level, energy was the standout performer, supported by expectations of the global economy reopening linked to the vaccine rollout. Precious metals were notably weak against higher US Treasury yields and a stronger US dollar. In fact, gold prices had the weakest start to the year since 1982 and experienced quarterly double digit losses for only the third time in the 21st century, with the other two occasions also seeing a sharp rise in Treasury yields – Q2 2013 Taper Tantrum and Q4 2016 Trump Election Victory.


  • The delayed data for UK commercial property returns over the month of February saw another month of marginally positive returns for investors. The latest MSCI UK Property data recorded total returns of +0.6% over the month, with capital values rising +0.15%, while income remained stable at +0.45%.
  • At the sector level, February’s capital values data highlighted the continuation of recent trends, as industrial properties remained in demand, while offices and retail were weak.


The value of your investments, and the income derived from them, can go down as well as up, and you can get back less than you originally invested. Any indication of past performance or quoted yields is not an indicator of future returns. Before investing in funds, please check the specific risk factors on the key features document or refer to our risk warning notice, as some funds can be high-risk or complex, or can be susceptible to risks particular to the geographical area or industry sector in which they invest. Gold, technology and other focused funds can suffer as the underlying stocks can be more volatile and less liquid. Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability and the market(s) can be less liquid.

The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.

Any research or analysis contained in this document has been undertaken by us for our own use and may be acted on in that connection. The contents of the document are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. The document may include forward-looking statements which are based on our current opinions, expectations and projections. It is provided to you only incidentally, and should not be considered a personal recommendation or advice to invest. Any opinions expressed are subject to change without notice.

Issued by Tilney Investment Management Services Limited (Reg. No: 02830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Tilney Investment Management Services Limited and other companies in the Group, further details of which are available at
© Tilney Smith & Williamson Ltd 2021

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