In April, developed markets saw restrictions continue to relax, economies continue to re-open and vaccination programmes continue at a reassuring pace. Equity markets had another strong month as the US 10-year treasury yield fell from its March peak of 1.75%, ending the month closer to 1.6%, helping to ease concerns around stock valuations. COVID-19 vaccine rollouts in the US and UK have continued to proceed well, and even Europe, after a difficult start to the vaccine campaign, has seen the pace of vaccinations accelerate. April saw the S&P 500 return 3.92% and the FTSE All-Share return 3.76%.

Company earnings continued to show strong growth off the back of more economic activity. Companies delivering above expectation “beats” however, have only seen small moves in price, suggesting the market is still very much focused on the direction of macro issues such as interest rates and inflation. A key aspect of this is job creation, and a huge miss on US job growth numbers (266k versus a consensus forecast of 990k forecast) has some economists scratching their heads, with some suggesting that generous COVID support packages are disincentivising working. In Europe, despite improvements in vaccination programs the economic and inflationary outlook remains behind that of the US and UK. European Central Bank Chair Christine Lagarde has been strongly hinting the EU will not be tapering bond purchases anytime soon.

Emerging markets continued to struggle as relative growth in the west picks up. India in particular is in the grip of a worsening COVID-19 crisis, amplifying the need for vaccination rollouts to be broadened to the emerging countries if the pandemic is going to be truly declared over.

The debate continues as to whether growing inflationary pressures are as transitory as central bankers are forecasting. Fundamental data are encouraging, but the intense focus on potentially high-impact central bank communications and economic data is driving a high degree of volatility in markets.