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Global Markets to 23 April 2021


The global economic recovery is under way

but we are not out of the woods yet

Although we have every reason to believe that the global economy will continue to recover at an unprecedented pace, there are sure to be bumps along the way. Investors should therefore brace themselves for some disappointments in global equity markets. In a typical economic recovery, positive economic and corporate earnings data can be interspersed with pullbacks: a global economic recovery therefore needs to be earned rather than expected.

The US has enjoyed strong retail sales and job numbers, while in China, an 18.3% year-on-year rise in economic output has been warmly welcomed by economists. In the UK, April has seen company order books start to fill up again as Covid-19 restrictions are lifted. Meanwhile, the UK’s Composite Purchasing Managers’ Index (PMI) suggests the country being on the verge of a rapid recovery.

While the UK stock market has been unloved since the Brexit referendum result of five years ago, recent positive talk about the future economic recovery has seen investors return: the FTSE 100 – the country’s blue-chip index – powered through the 7000 mark for the first time in a year, before drifting back slightly last week. But perhaps more importantly, the FTSE SmallCap Index, which is more representative of our domestic economy, is up over 22% since the start of the year. Similarly, a strong economic and corporate earnings recovery could be followed by a new dawn for UK dividend payouts. This would be most welcome after a period of aggressive cuts and suspensions throughout the darkest days of the pandemic. Although it is unlikely that we will see a return to the era of bumper UK dividend payouts any time soon, better times most certainly lie ahead for income seekers – both from a domestic and global perspective. 

Vaccine rollout is working well in the UK…

but other countries are still suffering

The post-pandemic recovery will not be smooth sailing. That said, the UK’s vaccination programme is proving successful: Covid-19 infections across adults of all ages have fallen by 65% and nearly half the population has received an initial dose of either the AstraZeneca or Pfizer vaccine. Unfortunately, however, the picture in other regions across the world is very different. India has set an unwelcome world record for new infections, daily fatalities have been upwards of 2500 for the best part of a week and hospital beds, medicines and oxygen are all in short supply. Parts of Latin and North America are also seeing surges in numbers as new mutations emerge. It is hoped, however, that the vaccination programmes in place will lead to a fall in infection rates in the summer and autumn months. 

Biden convenes his virtual climate change summit…

and unveils corporate tax reforms

In the US, President Biden has held his innovative virtual climate summit, aimed at ushering the US back into the global arena to combat the climate crisis and take the lead on all issues to do with the Green Revolution. His US$2 trillion infrastructure plan encompasses climate-friendly initiatives to encourage electric vehicle use, curb greenhouse gas emissions and climate-proof ailing roads and buildings… the overarching aim being to reduce the country’s overall emissions by over 50% by 2030 (compared with its 2005 levels). The White House insists that the US can meet these targets, even if Congress rejects Biden’s calls for trillions of dollars in green infrastructure spending. Japan and Canada have also issued encouraging statements about their emissions reduction targets. 

Perhaps more importantly, both the US and China have agreed to the Green Revolution – China has even claimed that it wants to become the number one country in the issuance of green bonds. The financial system and its corporate markets both have a huge role to play in supporting the green transition and ensuring the world’s overall sustainability. But meeting these goals of curbing climate change and protecting our planet for future generations requires the commitment of every government, central bank and administration around the world.

Electric vehicles

and their possible effects on inflation

The climate programme is indeed of paramount importance. But so is the global economic recovery, and evidence of just how important it is has already been seen in the performance of certain asset classes, such as commodities. Recently, China has started stockpiling certain base metals – such as copper, which is widely used in construction and manufacturing, as well as in the production of batteries for electric vehicles (EVs). From renewable-energy grids to wind turbines, copper is an important component in making the energy transition work.

Lithium and cobalt are also used in battery production, but there are growing concerns that any future weakening of the US dollar combined with zero interest rates and pent-up demand for these specialist metals may all help create the fourth commodities super cycle in a century.

Commodity super cycles tend to last for a decade and can affect inflation if prices spiral out of control. Although the EV revolution is still in its infancy, metals such as copper, cobalt, lithium, nickel sulphate and palladium will find themselves in increasingly high demand to make high-performance batteries. At the same time, more traditional metals – such as aluminium – are being used to build lighter vehicles, while silver is widely used in photovoltaic insulations. 

Corporate earnings season begins in the US

… as some of the world’s largest companies begin their reporting

The first-quarter US corporate earnings season is now in full swing, and currently more S&P 500 companies are beating their per-share earnings estimates for the first quarter than average. These above-average growth rates can be attributed to a combination of higher earnings for 2021, as well as an easier comparison with 2020’s weaker earnings – COVID’s impact on numerous industries.

This is still a big week for US corporate earnings numbers, with many of the world’s largest corporations reporting their Q1 figures. At the same time, investment analysts will be engrossed in senior management teams guidance statements for the next quarter and beyond. Overall, this is likely to determine the direction of the markets over the next few weeks. Disappointments will be punished by the market and by a further rotation within sectors’ widening asset allocations.

Finally, President Biden’s proposed doubling of capital gains tax rates for the richest Americans created some measure of nervousness in the markets last week, together with a chorus of disapproval from investors – the US economy is still, after all, suffering from the pandemic.

His planned tax raises are designed to pay for extra spending on childcare, education and other tax credits geared towards families. In response, the market spluttered and retreated, before eventually brushing aside its concern: Biden’s plans would need to be approved by Congress, and there is every chance that they will need to be watered down before this can happen.

Global equity markets remain attractive…

… and we see any pullback as a buying opportunity

We would therefore see any significant pullback in the markets over the coming weeks as a buying opportunity: the global economic recovery has only just begun and so many company share prices are likely to rise further throughout the year.


Peter Lowman is the Chief Investment Officer at Investment Quorum, a Director of the company and an integral member of our investment committee.

This article does not constitute specific advice and investors should bear in mind that capital invested is not guaranteed. Investment Quorum is authorised and regulated by the Financial Conduct Authority.

If you would like to hear more about our wealth management services then please do not hesitate to call us on 0207 337 1390 or contact us via email. We would love to hear from you.




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