The last week before the Easter break saw risk assets rally strongly as investors left the haven of cash and re-entered the market. While High Quality Bonds rallied +0.3%, the greatest moves were seen in the riskier segments of the Fixed Income markets, as High Yield Bonds gained +4.7% and Local Emerging Market Debt rallied +4.6%. In Equities, Global Equities as measured by MSCI ACWI rose +8.6% in GBP terms, while the S&P 500 Index of US Equities rallied +10.3% – its strongest weekly performance since 1974.

While we expect markets to remain volatile to the upside and downside for the remainder of the year, the returns highlighted above illustrate the critical importance of remaining invested throughput the market cycle – no matter how painful the prior drawdown may have been.

Market performance has been driven by a number of factors, which of course all centre around the ongoing Coronavirus pandemic. Chinese trade and economic data has been better than expected as the Middle Kingdom begins to lift restrictions, awakening dormant companies. As with all Chinese data, this should be treated with caution, however. It has been reported that over 70 vaccines are being developed globally, with some about to begin human testing. In addition, some European countries are beginning to contemplate re-opening their economies – although the situation remains bad in the UK.

The economic damage caused by the virus will likely have ramifications for some time, and pockets of infection or re-infection may arise around the globe sporadically. This informs our view that market volatility will persist.