26th April 2021
It’s now just over a year since equity markets across the world reached the bottom. Since then, the MSCI World Index has rallied by 79% and now sits 18% above its pre-Covid highs.
The continuing vaccine rollout has boosted markets across the world as economies prepare to open up. Even in areas where vaccine rollout has been slow – Japan has vaccinated less than 5% of its population – equity markets performed well in the first quarter of 2021.
Here’s how the various regional stock market indices performed in the first three months of 2021.
Source: JP Morgan
Let’s take a closer look at regional performance.
UK equities performed well, with the FTSE All-Share index rising by 5.2% in the first quarter as more than 37 million people received their first dose of vaccine by the end of March. Indeed, the FTSE 250 hit a record high in the first week of April, breaching the previous peak set after Boris Johnson won the December 2019 General Election.
The FTSE 250 rose from 20,537 at the start of the year to 21,574 at the end of March, as this chart shows.
Source: London Stock Exchange
Materials, energy, and financials were strong performers, while bank shares rose amid better-than-expected results.
The IHS Markit/CIPS composite Purchasing Manager’s Index rose in March to 56.6 (any reading above 50 signals expansion). This signified the fastest rate of economic expansion for seven months ahead of lockdown measures easing towards the period end.
The Democrat victory in the Georgia run-off gave President Biden the Senate majority he needed to pass significant stimulus measures in the US.
US equity markets continued to surge on the back of a $900 billion stimulus agreed at the end of 2020 and a $1.9 trillion relief package signed in early March. The American Jobs Plan announced on the last day in March also proposes an additional $2.25 trillion in spending geared largely toward improving transportation, communication, and power infrastructure.
An estimated 150 million vaccine doses have already been given in the US, with the administration hoping all adults will have been offered a vaccine by the end of May.
US GDP is expected to grow at its fastest rate since 1984, with predictions of 7% growth and unemployment falling towards 5% by the end of 2021. The continued rollout and easing of restrictions should continue to support equity markets for the rest of the year.
Even though the Eurozone has only inoculated around 11% of its population, equities in the region rose by just over 8% during Q1.
The flash PMI for March reached a record high of 62.4, signalling strong growth.
However, some countries are experiencing rising Covid-19 rates, and many have been forced to implement new restrictions to support healthcare services.
With question marks remaining over international travel, a lack of tourists could still be damaging for many EU countries, notably France, Spain, and Italy.
The rally in Japanese equities continued after a strong set of quarterly results, with the TOPIX index rising by more than 9% in the first three months of 2021.
It looks increasingly likely that the Tokyo Olympics will be held this summer, although the economic benefits may be limited as international spectators will not be allowed to attend.
The MSCI Asia ex-Japan Index also recorded positive returns in Q1 as investors remained optimistic about the easing of coronavirus restrictions. However, slow vaccine rollout in some countries – for example, the Philippines – meant that measures were tightened towards the end of March.
The best-performing markets in the index were Taiwan and Singapore.
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