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Financial Market Review: First quarter 2021

A quarterly review of results in the global equity, fixed income, currency, and commodity markets.

The views expressed are those of the authors at the time of writing. Individual teams may hold different views. The value of your investment may become worth more or less than at the time of original investment. For professional or institutional investors only.

Global equities (+6.0%) rose for the fourth straight quarter. Markets continued to advance amid the accelerating global rollout of vaccines, a favorable outlook for global economic growth, and substantial support from governments and central banks. Massive stimulus measures combined with pent-up savings and significant supply-chain disruptions throughout the global economy fueled expectations for higher inflation. That increased concerns that central banks may have to tighten monetary policy to an extent that could impair equity markets. Despite a broadening rollout of vaccines, global coronavirus trends remained volatile, with Europe experiencing a sharp rise in COVID-19 infections, extended lockdowns, and a slow vaccine rollout. In contrast, vaccinations in the UK accelerated sharply, and US President Joe Biden announced that America is on track to have enough vaccines for every adult by the end of May. The European Parliament approved the Recovery and Resilience Facility, which will provide €672.5 billion in grants and loans to help European Union (EU) countries to alleviate the social and economic effects of the pandemic, while President Biden signed into law a massive US$1.9 trillion coronavirus relief bill.

Global fixed income sectors generated negative returns over the first quarter. Sovereign yields moved sharply higher on an improving growth outlook and a reinforced reflation narrative. Most fixed income spread sectors continued to outperform, with vaccine distribution gathering pace across developed markets and major central banks committing to maintain accommodative policy. Sovereign yield curves generally steepened, as easy central bank policies anchored front-end yields, while additional US fiscal stimulus lifted inflation expectations. The US dollar strengthened versus most currencies.

Commodities (+13.5%) surged, with three out of four sectors advancing…

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