Written by Cormac Nevin

Last week was a broadly weaker one for global markets, following one of the best first quarters for equity markets in five years. While the strong performance of equity markets in the last three and six months is of course very welcome, our team notes the concentrated nature of certain parts of the rally.

Global equities, as measured by the MSCI All Country World Index in GBP, were down -0.7% for the week. The Japanese equity market was the most negative, falling -2.5%, as measured by the MSCI Japan equity index in GBP terms. Japan was one of the most profitable markets in the first quarter of the year, so this probably represents an element of profit taking and rebalancing by global investors. In contrast, Global Emerging Market equities rallied +0.4%, after Chinese shares bounced back from a poor first quarter.

One of the most significant and interesting data releases last week was the “non-farm payrolls report” (NFP) from the US. This showed that the economy created +303k new jobs for the month of March. This was ahead of economists’ predictions of +200k. The US jobs market, which the global economy revolves around to a certain extent, looks robust on the surface based on a high-level reading of this data. However, there are elements within the data which give our team greater pause for thought. Out of the +303k estimated job gains, the Manufacturing sector of the economy added none, while the government sector added +71k, as the government continues to run what many consider is an unsustainable fiscal deficit.

The headline US job growth was also powered by a surge in part-time jobs, while the number of full-time jobs actually shrank in the month of March. Our team note that since 1970, every time US full-time job growth has been negative, the economy has been in recession. It is also interesting to think about how traditional datasets like the NFP report might be failing to capture newer job market dynamics, such as “gig-economy” technologies such as Uber and Deliveroo.

Whatever the true picture of the health of the US, or indeed any other economy, our team retains the view that such ambiguity is best countered with a portfolio which is extensively diversified by geography & investment style.


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