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Global equity markets had another strong month in April with the MSCI World index up 4.3% in Sterling terms.

44% of the US population have now received at least one dose of a COVID-19 vaccine. The service economy is re-opening and the US economy grew at an annualised rate of 6.4% in the first quarter, whilst the unemployment rate fell to 6.0%  US markets were also buoyed by large scale fiscal stimulus plans with a $1.9 trillion “American Rescue Plan” passed in March and two further spending plans, a $2.3 trillion American Jobs Plan and a $1.8 trillion  American Families Plan outlined in the last few weeks. Additionally, quarterly earnings reports for companies included within the S&P 500 have been very strong with 87% of companies having results ahead of forecasts.  In the year to date the iShares Core S&P 500 tracker fund which is included in 4 of our model portfolios has returned 9.46%. We continue to monitor the valuation level of US equity markets relative to other developed markets, but recognise the scale of fiscal and monetary support that has been put in place.

51% of the UK population has now received at least one dose of a COVID-19 vaccine raising the prospect of gradual easing of social and economic restrictions. The Bank of England forecasts a recovery in economic growth of  7.25% this year.  UK dividend payments dropped significantly in 2020, with two-thirds of companies reducing or cancelling their dividends. However, the Link Dividend Monitor Report for the first quarter of 2021 found that 50% of UK companies either increased, restarted or held their dividends steady, indicating that recovery in dividend payments is underway. This is good news for our UK Equity Income fund selections, which also stand to benefit from the potential for capital growth in the UK equity market as economic recovery gets underway. The iShares Core FTSE 100 fund included in our model portfolios has returned 10.33% in the year-to-date.

The European Union continues to lag the US and UK with a daily vaccination rate of between 0.6% and 0.8% of the population and the slow vaccine rollout means economic recovery is likely to lag the US and UK. However, we have maintained our exposure to a Europe within our model portfolios on the basis that our fund selection has significant exposure to multi-national companies, which draw some of their revenues outside of Europe.

The Chinese economy grew 0.6% quarter on quarter to March 2021. Domestic consumption is expected to be the major growth driver as economic activity normalises after the pandemic and the exposure to China within our Asia Pacific and Emerging Markets fund selections continues to be tilted towards the theme of domestic consumption.

COVID-19 infections have soared in India, with tragic social consequences. We recognise that the economy may now contract in the second quarter, with economic recovery unlikely to recover until much later in the year. While the short term outlook is challenging, we believe the long term economic growth story for this vibrant democracy with rising consumption levels and strong pharmaceutical and technology sectors remains intact. The Stewart Investors Indian Subcontinent Sustainability fund included in our more adventurous portfolios has returned 8.07% in the year-to-date and continues to be our preferred fund in this region because of its focus on more defensive companies with solid corporate governance.

This article is for information purposes only. It does not constitute investment advice and is not a recommendation to invest. The value of investments and the income from them may go down as well as up and you may not get back your original investment.  Past performance is not a guide to the future.

Date of publication: 10 May 2021

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