Market Commentary March 2021Posted: April 12, 2021
In March equity markets lifted higher despite the worrying rise in COVID cases and new lockdowns particularly in Europe, central banks are continuing efforts to provide economic stability for both households and companies to ensure there is a strong platform to grow from. This central bank stimulus combined with unprecedented fiscal stimulus a year on from the declaration of COVID-19 as a global pandemic has seen growth assets return between 23-52% over the last 12 months.
Back in February we witnessed a surge in bond yields, indicating investors are expecting strong inflation over the medium to longer term, and in March whilst Australian bond yields softened slightly US bond yields rose significantly, further adding to inflation concerns. The COVID-19 vaccine rollout is of course helping however in Australia we seem to be lagging the rest of the world which will make the opening up of our borders a little trickier in the near term. Despite concerns around employment in Australia, that could be argued is artificially high due to the job keeper and job seeker efforts, unemployment has fallen from 6.3% to 5.8% a staggering drop given the current economic conditions however underemployment, i.e. those who want to work more hours or utilize their skills/education further still sits at 8.8%.
The Australian equity market was positive in March with the ASX100 up 2.5%. with both the Materials and Information technology sectors underperforming. The Materials sector was dragged lower primarily due to a weaker iron ore price which fell nearly 6% and as a result major iron ore producers fell in March. The Information Technology sector fell led by the Buy Now Pay Later stocks as investors took profits after very strong price rises in the past year. The Consumer Discretionary sector was one of the best performing sectors as was the Communication Services sector.
International equities rose by 4.3% on a currency-hedged basis while a slightly weaker AUD (moving from US$0.7706 to US$0.7617) increased returns slightly for unhedged investors to 5.0% for the month. The S&P500 and the Dow Jones Industrial Average in the US continue to hit all time highs as investors view the US vaccine rollout as a huge catalyst for stronger company earnings plus President Biden’s “American Rescue Plan” worth US$1.9tn will see direct payments being made to individuals, businesses and schools.
The yield on the Australian 10-year government bond yield fell 13bps to 1.79% and the 2-year government bond yield fell by 3bps to 0.09%. Conversely in the US the 10-year government bond rose by 34bps to close at 1.74% and the 2-year government bond yield rose by 3bps to 0.16%.
Benchmark Returns 31 March 2021
RESEARCH INSIGHTS IS A PUBLICATION OF AUSTRALIAN UNITY PERSONAL FINANCIAL SERVICES LIMITED ABN 26 098 725 145 (AUPFS). ANY ADVICE IN THIS ARTICLE IS GENERAL ADVICE ONLY AND DOES NOT TAKE INTO ACCOUNT THE OBJECTIVES, FINANCIAL SITUATION OR NEEDS OF ANY PARTICULAR PERSON. IT DOES NOT REPRESENT LEGAL, TAX OR PERSONAL ADVICE AND SHOULD NOT BE RELIED ON AS SUCH. YOU SHOULD OBTAIN FINANCIAL ADVICE RELEVANT TO YOUR CIRCUMSTANCES BEFORE MAKING PRODUCT DECISIONS. WHERE APPROPRIATE, SEEK PROFESSIONAL ADVICE FROM A FINANCIAL ADVISER. WHERE A PARTICULAR FINANCIAL PRODUCT IS MENTIONED, YOU SHOULD CONSIDER THE PRODUCT DISCLOSURE STATEMENT BEFORE MAKING ANY DECISIONS IN RELATION TO THE PRODUCT AND WE MAKE NO GUARANTEES REGARDING FUTURE PERFORMANCE OR IN RELATION TO ANY PARTICULAR OUTCOME. WHILST EVERY CARE HAS BEEN TAKEN IN THE PREPARATION OF THIS INFORMATION, IT MAY NOT REMAIN CURRENT AFTER THE DATE OF PUBLICATION AND AUSTRALIAN UNITY PERSONAL FINANCIAL SERVICES LTD (AUPFS) AND ITS RELATED BODIES CORPORATE MAKE NO REPRESENTATION AS TO ITS ACCURACY OR COMPLETENESS.