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Market Analysis

Updated: Mar 22, 2021

Best performance of US markets since November 9.

Investors have been waiting for two major deadlines.

New announcements have strengthened budgetary and monetary support.

US markets kicked off the week with their best performance since November 9, the period after the US elections when Pfizer/BioNTech unveiled its Covid-19 vaccine. The triggers were a 17-year high in manufacturing ISM, news that Apple stores in the United States were about to reopen for the first time since April 2020 and the approval by the House of Representatives of the new stimulus plan. Investors then paused to see what Jerome Powell would announce and the results of the OPEP+ summit on Thursday 4th of March. The cartel decided to leave output unchanged in April while allowing Russia to increase production slightly. Oil prices rose sharply on the news. Jerome Powell reiterated the bank's stance that there would be no return to a normal monetary policy for some time and brushed off recent rate rises, saying he was comfortable with accommodating financial conditions as rises in inflation would only be temporary. Markets were clearly expecting a more combative response and US 10-year treasury yields moved back above 1.5%, sending the US dollar higher and equity markets much lower. The period ended on a down note for risk assets and government bonds. Sector and thematic rotation increased with cyclicals, financials and energy performing better and sharp falls among growth and tech stocks. Budgetary and monetary support was underpinned further when several ECB members reassured investors by stating that liquidity was abundant and eurozone interest rates were structurally low. In United Kingdom, the Chancellor of the Exchequer’s new budget contained fresh stimulus to drive consumption and jobs. Haruhiko Kuroda, the governor of the bank of Japan, said favorable financial conditions would be maintained for some time to spur the economic recovery. Amid today's increased volatility, we remain upbeat on equities. Economies are gradually reopening; earnings are rebounding, and central banks and governments are still providing support. In fixed income, we are still cautious on government bonds, especially in the United States.

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