14 April 2021

Roll on summer

There has been a remarkable dearth of hard news in recent weeks. It’s not that nothing is going on – rather that such stories as hit the headlines are having little impact on investor sentiment.


Perhaps the most relevant, the opening of non-essential shops and hospitality venues outside, generally delivered a positive message. Perhaps that is why shares have managed to shrug aside such news as might have a negative influence.

Certainly, markets have continued to hold up well, despite rising cases of infections in the populous nations of India, Brazil and Turkey and increased tension between Russia and the Ukraine. Indeed, US shares hit new highs recently, while our own second tier FTSE 250 Share Index also achieved a new record. While the Footsie, our benchmark share index, has been relatively quiet of late, it has still managed to trend gently upwards.

With little in the way of company news to stimulate interest, it is economic headlines that are making the running. Trade figures for February showed a bounce back in trade with the European Union from the slump in January, though numbers are distorted by stockpiling that took place at the end of last year. Economic growth also perked up a little, but the economy is still nearly 8% down on pre-pandemic levels. However, recent Purchasing Managers Indices – considered a good forward economic indicator – have been coming in ahead of expectations.

But it is to the gradual winding down of lockdown restrictions to which we should be looking, though. All the indications are that the recent easing saw significantly enhanced footfall in those shops that have been able to reopen. Pubs, too, have seen reasonable levels of trade, although the majority have stayed closed until custom is allowed to return indoors. Still, it feels like a step in the right direction and suggests that further easing later this year may have an even greater effect on economic activity.

With economic pundits forecasting a faster rate of recovery around the world than had previously been expected, markets have some reason to be cheerful. But it remains more likely that the absence of decent alternatives is as important in driving this positive sentiment as growing confidence in the final economic outcome. Cash yields little if anything and bond yields, while rising, are still low. Moreover, higher inflation, perhaps for just a limited period, is increasingly being factored into investors calculations. We are not out of the woods yet.

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