February was a positive month for global equity markets which rose 0.5% in sterling terms. The best performing equity market was the UK large cap index up 1.6%, a beneficiary of the vaccine rollout as well as the announcement of a reopening plan for the economy. Cyclical industries continued to benefit from expectations of increased global consumption throughout the rest of 2021.
Whilst the US main market rose 0.9% in February, the growth focused technology sector was impacted by rising inflation expectations and increased scrutiny from competition authorities leading to it falling -0.8%. Fiscal policy was the other key theme discussed with the US Treasury Secretary Janet Yellen indicating an upcoming rise in the corporate taxes to 28% and Rishi Sunak expected to increase corporation tax in the UK budget during March.
Positive global economic data alongside a continuation of easy monetary and fiscal policy led to medium-term global bond yields rising significantly. Rising yields indicate future global growth and potential for interest rates rises. This led to a selloff in major equity markets at the end of the month with specific reference to Emerging Markets as the People’s Bank of China signalled policy tightening and Biden indicated a shift of supply chains away from the region. Even on the back of short term weakness in equity markets the outlook for 2021 remains positive with supportive fiscal and monetary policy providing continued support for stock market driving corporate earnings growth on the back of a strong cyclical recovery.
Asset class returns at 28th February 2021
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