Still the financial markets were in good spirits in March. This ended the first quarter on a very positive note, especially for equities. Although commodities and expected inflation rose, influenced in part by flaring unrest in the Middle East, government bond yields fell. Interest rates on German and Dutch government bonds rose faster than European government bonds in the first quarter, which is striking (and typical of the current climate). Germany and the Netherlands are known as safe countries; investors have evidently become more risk-seeking.
Shares
Equities continued the positive trend in March. This caused new all-time highs here and there among the indices: the Nikkei, the S&P 500, but also our own AEX index. Last month, the MSCI All Countries World Index (developed + emerging markets combined; measured in euros) achieved a positive return of +3.3%. Emerging markets did slightly less well than developed markets (+3.4%), but still achieved a nice plus of 2.7%. Europe (+3.9%) was the best performing region within developed markets. North America (+3.4%) and Japan (+3.2%) were close behind. At some distance, Pacific excluding Japan (+1.5%) closed the row. All regions within emerging markets (+2.7% for the broad index) also achieved positive returns. However, Latin America (+1.2%), China (+1.1%) and EMEA (+0.4%) lagged relatively far behind Asia (+3.2%).
Style growth stocks (+2.2%) lagged style value stocks (+4.5%) this time.
Bonds
In March, in line with the entire first quarter, we saw that short-term interest rates fell slightly less than longer maturities. We also noticed that the gap between Europe and the U.S. widened again somewhat. Last month, for example, the 10-year rate there fell 0.05% to 4.20%. The 10-year rate on German government bonds fell 0.11% in March to a level of 2.30%. For Dutch government bonds with the same maturity, the decline was slightly stronger: (-0.13%, to 2.61%). Also last month, risk premiums fell against “safe” government bonds from developed countries. For emerging market government bonds, the premium decreased by 0.27% to 3.42%. For less risky corporate bonds, we saw a decrease of 0.08% (to 1.13%); we also saw this decrease for more risky corporate bonds (to 3.41%).