Inthe first quarter, there was optimism in the financial markets about a global economic recovery. Developments in both the United States (US) and Europe fed this optimism.
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Equities developed markets
Equity markets in all developed countries rose sharply. As in the last quarter of 2020, there were hardly any major differences. In the US, returns (9.7%) were helped by a 4% rise in the dollar. In Europe, the increase was 8.4%. Despite some Brexit troubles, the British market did slightly better still: 10.5%.
The best performing sectors were financials (including banks and insurers), energy (including oil and gas companies) and industrials. Companies focused on consumer goods, healthcare and IT performed a lot less, even below the stock market average.
Developments in emerging market equities
Emerging markets are countries that are still developing. Here, too, prices rose. The MSCI Emerging Markets Index tracks an average of stocks in these types of countries and rose 6.5% in the first quarter.
This was not due to Latin America, where markets declined slightly on balance. And especially in the countries strongly affected by the coronavirus: Brazil, Argentina and Colombia. Favorable exception was Chile. There – thanks in part to a successful vaccination program – a 21% gain was recorded.
In Asia, the index rose 6.4%, thanks mainly to India (over 9%). China lagged behind at 3.7%. In Eastern Europe, Russia and the Czech Republic stood out with returns of nearly 10%.
Fixed income securities
Government bonds
Interest rates on government bonds rose during the first quarter. This was the case of optimism about economic recovery and growing concern about (rapidly) rising inflation. More risky government bonds outperformed safe European ones.
Yields for 30-year German and Dutch government bonds are slightly positive again thanks to the rise. For 10-year government bonds, the yield – despite an increase during the first quarter – is still negative in both countries.
Emerging market bonds
Emerging-market government bond yields were negative this quarter. Positive outliers were Angola, Costa Rica, Sri Lanka and Zambia; bonds from these countries actually rose sharply in value.
Corporate bonds
Corporate bonds had a fairly stable quarter, both in Europe and the US. Corporate bonds in Europe outperformed a comparable portfolio of German government bonds by 0.4%. In the U.S., the standard credit index outperformed U.S. government bonds by 0.9%. Differences between sectors were again relatively small.
Higher-risk global bonds experienced another very strong quarter. The category far outperformed – as it did during the fourth quarter of 2020 – a portfolio of underlying government bonds. Emerging markets did lag slightly behind the U.S. and Europe. The best-performing sectors were energy and leisure.
Summary
Although the entire quarter was again dominated by the pandemic, markets remarkably still managed to recover further. That recovery was helped mainly by government support packages and the huge liquidity provided by central banks. Favorable prospects for the development of vaccines against COVID-19 also had a positive impact on the market. Although large parts of the economy remain closed, the economic outlook seems to be improving. Optimism knows no bounds!
What do these developments mean for you?
See below the cumulative annual returns of our investment cohorts through March 31, 2021.
