Overall Market Backdrop, February
– Across the world, the impetus changed during the month from vaccine availability to vaccine rollout, as we saw multiple products hit the market to combat COVID-19, and the focus switched to how well nations were navigating the Herculean logistical challenge of a nationwide vaccine rollout program.
– Developed market equities posted positive returns, with Europe particularly strong in local currency terms.
– The FTSE all share shrugged off Sterling strength to post a 2% gain, largely on the news of the vaccination programme which hit 20 million people by month end.
– Likewise, any positive movements in Asia ex-Japan and emerging markets were nullified by the moves in Sterling.
– If the British Pound continues to strengthen then we can expect a continuation of the outperformance of UK small cap stocks relative to large cap, since they have far less exposure to overseas markets than the large cap stocks, and thus are not as exposed to the dilution of overseas earnings when translated back into Sterling.