Overall Market Backdrop, March
– Optimism was the order of the day for March, as comparatively successful vaccine rollouts in the UK and USA led to rising bond yields and a continuation of the rotation out of growth stocks and into value and small cap names.
– Financials continue their resurgence, given their tight correlation to rising bond yields and the steepening yield curve.
– The stronger dollar has led to the beginnings of a bifurcated effect on emerging markets: according to the International Institute for Finance (IIF), the expected surge in export activity from a strong dollar may not be sufficient to offset the capital outflows that result. This causes the emerging market currencies to weaken, and inflation to rise, as imports become more expensive.
– The Eurozone and Japan continue to grapple with far less successful vaccine rollouts (with 11% and 1% of their populations having received at least one dose of the vaccine by the end of March, respectively; by contrast, the US had administered at least one dose to 37% of its population, while the number for the UK stood at 58%), and thus growth prospects for the region remain tempered. Despite this, both Japan and Europe performed well, with Europe managing to outperform the UK in Sterling terms over the month.