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LCP Investment Summary February 2021
Posted on 2 March, 2021 by Administrator
Global equity markets rose 2.6% (in € terms) in February. Equity markets rose strongly in the first half of the month. U.S. markets in particular climbed on the news that that 80% of U.S. companies exceeded earnings expectations in Q4. Global vaccine programmes were also a positive factor although many European countries still have tight restrictions in place and some recently introduced tighter border controls.
The mood turned after the release of U.S. retail sales mid-month that were much stronger than expected. This, and the proposed $1.9trn fiscal stimulus package, prompted fears that inflation could rise quicker than expected which may then mean earlier than planned interest rate rises. However the U.S. Federal Reserve stated that it had not changed its stance on keeping interest rates low for the foreseeable future. As a result of these inflation fears, global bond yields rose sharply which affected equity markets as higher bond yields can make equity valuations less attractive to some investors. Technology stocks fell as they tend to have higher valuations than the overall market, and on the possibility that consumers may begin to move away from online shopping to some extent as economies begin to re-open more fully over 2021.
Longer-dated Eurozone bond prices fell 4.7% over the month, with the yield on the AAA Eurozone 15+ Year Index rising to 0.07% by month-end. The Euro Broad Sovereign 10+ Year Index fell by 3.9% with a yield at 0.63% at month-end. Eurozone bond prices fell, and yields rose, sharply over the month mirroring the rise in U.S. yields, despite a weaker economic and inflation outlook that the U.S.
Sample DC Schemes
Our Medium Risk and Pension Purchase DC Strategies fell over the month due to their holdings in longer-dated Eurozone government bond.