Stock Market Wrap-up – March 2021

Australian Cash & Fixed Interest — Review

There has been little change to short-term interest rates, and the 90-day bank bill yield remains close to zero. Longer term, the three-year Commonwealth bond yield continues to trade at the Reserve Bank of Australia’s target 0.1% level, while the 10-year yield continues to follow the US lead, rising in February and March but easing back more recently. For the year to date, the 10-year yield is up 0.7%, to 1.68%. The Australian dollar is stronger for the year to date, with a 1.1% gain in overall trade-weighted value. In headline terms it is trading at 77.15 US cents against the US dollar, a slight 0.2% gain.


Australian & International Property — Review

The S&P/ASX 200 A-REITs Index was weak through to the second half of February, but it has recovered since and is now all square for the year in terms of capital value. With dividends it has delivered a marginally positive 0.7% total return, well behind the wider sharemarket’s 7.4%.

Global listed property has been strong. The FTSE EPRA/NAREIT Global Index in US dollars has returned 11.0% including dividends, but it very much been a case of the US market and everywhere else: The US equity REITs have returned 16.6%, whereas the rest of the world has returned 5.5%. The UK has been the pick of the non-American markets, with a 9.5% return; the eurozone has been the laggard, with a small loss of 0.3%.


Australasian Equities — Review

Australian shares have been doing well, and the S&P/ASX 200 Index is up by 6.2% in capital value and by 7.4% including dividends. By sector the big winners have been the financials (ex the A-REITs), up 13.3% helped by strong housing lending and a resumption of normal dividends, and consumer discretionary stocks, up 12.7% on the prospect of previously pent-up household demand being spent in the shops post-pandemic. The miners, up 7.0%, have benefited from a firming world economy. IT shares have reflected the global rotation out of tech and into more cyclical sectors and are down 1.9% (though still up 86.5% on a year ago). The latest significant IPO, for nonbank lender Latitude, got off to a reasonable start, and at AUD 2.65 has made a small gain on its AUD 2.60 offer price.


International Fixed Interest — Review

Bond yields in the US rose steadily in February and March, and by the end of March the yield on the 10-year Treasury note had reached just shy of 1.75%, an increase of 0.8% for the year. Yields in other major bond markets also rose, though by less: The (negative) yield on the benchmark 10-year German government bond, for example, rose from negative 0.57% at the start of the year to its negative 0.23% peak on 25 Feb. Since then, however, the US yield has eased back to 1.57%, and other major market yields have also dropped a little. The recent reversal has eased the scale of capital losses for global bond investors but still left them out-of-pocket for the year to date. The Bloomberg Barclays Global Aggregate Bond Index in US dollars is down by 2.9%.


International Equities — Review

World shares have continued to rise as the world economy comes out of the worst of the pandemic. The MSCI World Index is up 9.0% for the year to date in US dollars. The pattern of recovery is rather uneven, however, and global equity outcomes continue to be disproportionately affected by the strong US market: Excepting the US, where the S&P 500 is up 11.1%, world shares are up 6.2%. European shares have done well, with the FTSE Eurofirst 300 Index up 9.5% in euros, while Japan has lagged: Although the Nikkei is up by 3.9% in yen, it is slightly down in US dollar terms after allowing for the yen’s 4.4% depreciation.

Emerging markets have been relatively subdued: The MSCI Emerging Markets Index is up by 3.5% in US dollars, and the core BRIC markets (Brazil, Russia, India, China) are marginally lower, by 0.1%. The Russian market has made modest gains (the MSCI Russia Index is up 3.2%), China and India have shown little change, while the overall poor result for the BRIC group was driven by lower prices in Brazil, where the MSCI Brazil Index is down by 7.7%.


Source: Morningstar Australasia Pty Ltd