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Global equity markets brushed aside Europe’s new lockdown restrictions and instead focused of the faster vaccine rollout in the US and the subsequent economic reopening, which bodes well for global economic growth and global equity markets.
After a challenging start to the week, global equity markets recovered strongly today (Friday 26 March 2021), and as a result ended the week marginally higher – and the reasons show how fickle equity markets can be in the short-term and why it was important to resist the urge for any knee-jerk reactions and maintain a long-term perspective.
We were already on tenterhooks ahead of policy meetings at the major central banks, but heightened geopolitical tensions; new coronavirus lockdowns in Europe; and a weaker oil price, all made for an exhausting end to the week.
Given the US President, Joe Biden, yesterday (Thursday 11 March 2021) signed his $1.9tr fiscal stimulus bill into law, meaning that qualifying Americans (those earning less than $75,000 individually or married couples earning less than $150,000) will each start to receive their $1,400 cash payment in the coming days, coupled with this pledge to have all Americans vaccinated by May, inflation and interest rates were again the hot topic of the week.
It has been a rollercoaster week for equity markets.
As you can see from the accompanying table, it wasn’t a particularly pretty week for global equity markets as the ‘topic du jour’ was whether inflation is about to go into hyper drive, following some strong US economic data and comments from a BoE policymaker.
As you can see from the accompanying table, over the week equity markets were little changed. However, of more interest is the fact that it was this time last year that equity markets began to fall as coronavirus, which until then was seen as being contained in Wuhan, started to spread outside of China.
Thankfully the brouhaha about an imminent return of inflation – and with it, tighter monetary policy via higher interest rates – didn’t last very long!
Unfortunately, you can’t always get what you want – but thankfully we did get the next best thing from the Bank of England’s monetary policy meeting this week: negative UK interest rates are viable and if the economic outlook weakens then the BoE is ready to take action.
For us, the main story of the week was the US Central bank’s monetary policy meeting.
