Posted 5th May 2021
Markets in review:
|Equities||Index Level||YTD Change|
|MSCI – Europe||145||9.5%|
|Shanghai Composite (China)||3,447||-0.8%|
|Brent Oil Futures||66.76||28.9%|
* Figures as at 30th April 2021
DPM in review:
- During the month, the Prime Minister, Boris Johnson announced that the UK would move to the next phase of the Governments roadmap out of lockdown due to the success of the vaccination programme a drop in COVID-19 cases and hospitalisations. On the 12th April, non-essential retail, hair salons and outdoor hospitality venues reopened their doors.
- The Halifax House Price Index reports showed that the average house price in the UK hit a new high record high in March. The continuation of the Stamp Duty holiday and the upcoming mortgage guarantee scheme may also provide a further lift. The average house price in the UK is now £254,606.
- The UK Consumer Price Index rose to 0.7% up from 0.4% in the previous month pushed higher by rising fuel and clothing prices.
- President Biden announced a further investment of $2trillion into infrastructure, with the funds being used to improve roads, railways, broadband and clean energy. It is likely the initiative will be funded by a rise in corporate taxes. During the month reports were also circling that President Biden was considering almost doubling the highest capital gains tax rate, which led to a sell off on American stock markets.
- US Consumer Price Inflation rose 0.6% month over month, pushing the annualised rate up to 2.6%. Core inflation, which strips out some of the more volatile measures (such as fuel and food), was ahead 1.6% year on year.
- China’s GDP rose by 18.3% in the first quarter compared to the same quarter last year. Despite the high figure this was still slightly below expectations of a 19% increase.
- The ECB kept all current stimulus measures unchanged, but announced it was stepping up the speed of its pandemic emergency asset purchase programme. ECB president Christine Lagarde said that the Eurozone economy was “on crutches, relying on support on one hand from governments and on the other from the ECB.”
DPM in action:
Over the month of April, we saw a rise in the level of inflation not only the UK and US but many other developed economies and China. These spikes in the current short-term inflation data caused investors to ask, ‘what level of inflation would cause a major central bank to increase interest rates.’ The answer to this question was answered during the month. Minutes from the US Federal reserve’s meeting showed that officials seemed happy with the direction of the US economy and wanted to see much clearer evidence of further progress before considering any change in policy. This means the central bank will not react to perceptions of the direction of travel but will wait until goals of higher inflation and full employment have been achieved.
Sentiment in the US over the past few months has improved drastically. With the US surging ahead with vaccinations, states emerging out of lockdown and positive economic figures, the investment committee decided it was the right time to put some funds to work in the US. An investment was made into a US, medium sized company fund. Medium sized companies in the US haven’t been as loved as the large capitalisation stocks over the last year and as such the Investment Committee believe this is where the main driver of growth will be seen over the coming months.
In addition to the US fund the Investment Committee also made the decision to gain some exposure to a global technology fund. The fund was picked due to its holdings in large, defensive, technology-based companies such as Microsoft, Apple, Alphabet, Samsung and PayPal to name a few. The fund is seen as a long-term structural hold which will benefit from the continuing transition to an ever more digital world. The companies the fund invest in are leaders in their fields and produce strong and stable revenues.
The advantage of the Laver Wealth Discretionary Portfolio Management service enables us to react and make changes rapidly for our clients as and when opportunities arise and to also be proactive when more defensive actions are required.
Quote of the month:
“We are working again, dreaming again, discovering again, leading the world again.”