Global markets took another leg higher in April, as the FTSE All-World Index climbed 4.4% after rising 2.9% the previous month. Notable progress has been made on the vaccination front in major economies such as the US and UK, with just over a third and a quarter of each population fully vaccinated respectively. Accordingly, 4% of the world population has now been fully vaccinated to date according to the latest figures from Our World in Data.
The reflation trading resumed in April, as the Refinitiv/Core Commodity CRB Index surged 8% after easing 2.9% in the previous month. However, the US 10-year bond yield retreated to 1.63% at the end of April, from 1.74% at the end of March. It is worth noting that bond yields have remained relatively range bound, consolidating not much more than 20bps from its recent highs.
As expected, the Federal Open Market Committee (FOMC) opted to keep their monetary policy stance unchanged with the federal funds target range unchanged at 0-0.25% and asset purchases at US$120 billion per month. The recent disappointing nonfarm payroll employment report reaffirms that monetary policy will likely remain particularly accommodative in the coming months and firms will almost certainly need to offer higher wages to absorb labour back into the workforce to fill the relatively high vacancy rates.
The VIX “fear gauge” eased even further in April ending the month at 18.6 from 19.4 at the end of March. The continued compression in volatility usually coincides with higher US equities prices, although we remain cautious of any sudden spike in volatility that is not episodic and non-trending. For now, we see further upside in equities which is also supported by well contained cross asset volatility indicators such as FRA-OIS spreads, OAS spreads and foreign exchange volatility.
It is worth noting that China continues to underperform broader emerging markets amid a stagflationary backdrop which has quelled support for their equity market. We continue to remain cautious of this region in terms of our positioning in the multi-asset fund range.
We remain constructive on sectors that will benefit from higher growth and inflation prospects such as US financials, energy, industrials, and small cap stocks. In addition, UK and Europe continue to look attractive amid the better-than-anticipated economic data releases and valuation metrics. We maintain that reducing exposure to lower beta utilities and health sectors remains appropriate due to the inelastic nature of their product and services offerings relative to the economic cycle in cyclical upswings for now. This has certainly been showcased year-to-date.
We remain constructive on emerging markets excluding China amid potential high growth rates in corporate earnings. We maintain our bearish view on the dollar amid its counter-cyclical nature in a global economic upswing. In fact, the resumption in the dollar down trend has provided renewed impetus to broader commodity prices.
We believe that the rollout of a viable vaccine this year will continue to be a positive catalyst to the global economy, although it will likely take some time to be rolled out at scale. Overall, we are encouraged by the more upbeat outlook and believe that the easing of lockdown restrictions combined with the unwinding of precautionary household savings will continue to catalyse equity markets in the near term.
The Funds continue to be underweight duration to avoid the adverse effect from curve steepening amid better growth prospects currently being priced into markets.
The Global Growth Fund climbed 3% in April, notably above the benchmark which rose 2.6%. The overweight to broader equity markets and global high yield positioning were among the primary contributors to the realised alpha over the month. The Global Balanced Fund climbed 2.7% and the Sterling Asset Management Fund rose 2.3%.
 All performance metrics are stated in I Class terms.