Weekly comment: Spring Cleaning

Weekly podcast: Markets Uncut

As we close out the first quarter of 2021, host David Henry, Investment Manager, is joined by Ben Barringer, Equity Research Analyst, to discuss the recent Deliveroo Initial Public Offering (IPO), who is dominating the semiconductor market and what China’s relationship with the US means now Joe Biden’s Presidency is in full swing.

Market overview – Alan McIntosh, Chief Investment Strategist

Last week saw the conclusion of March, and with that, the end of the first quarter of 2021. Markets saw out the period on a positive note with most regions experiencing a shorter week in the build up to the Easter weekend. US equities finished the week up 1.1% while the FTSE 100 remained relatively unchanged, dipping less than 0.1%. The rest of Europe along with China and Japan also enjoyed a positive week, all recording steady climbs of roughly 2%.
While US companies have been performing significantly well in 2021, they could be subjected to a corporate tax hike proposed by President Joe Biden to fund a $2 trillion infrastructure improvement plan, separate to the recent $1.9 trillion stimulus package recently rolled out. The infrastructure package is an initial phase that seeks (amongst other things) to improve the crumbling roads and bridges across America. However, if approved, the programme would likely run over the next 10-14 years, and therefore not an immediate catalyst for change. With that said, the potential corporate tax hikes might not be instant but rather phased in over the next few years.

Duncan Gwyther’s Economic overview

Business optimism surveys in recent days confirm the economic recovery continues, if anything at a slightly stronger pace than previously expected suggesting potential upside surprises in Q1 GDP. First we saw improvements in manufacturing – which continue – and now we are seeing strong rises in business optimism amongst services companies. The rate of recovery was expected to slow in China but the latest surveys suggest otherwise.
In the US some sentiment metrics are the highest on record and encouragingly broad based possibly reflecting the Biden administration proposals for further fiscal stimulus. Labour markets are also picking-up in the US especially in Covid-19 sensitive sectors, reflecting vaccine progress as well as better weather. The UK’s progressive vaccination programme has already helped manufacturing sentiment and we expect services to follow suit this week. Input pricing pressures and supply disruption feature in most surveys but these are likely to prove transitory.

Written by

Ben Barringer
Equity Research Analyst
Duncan Gwyther
Chief Investment Officer
Alan McIntosh
Chief Investment Strategist
David Henry
Investment Manager

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