This month has been quieter with the US ten-year yield drifting back a few basis points and the long bond a similar 6bp lower. UK ten-year rates have barely changed but German yields did improve from a negative 34bp to negative 25bp. US stocks have picked-up the running again with the S&P 500 making new highs again, up around 7% since our last note. This time the NASDAQ has kept pace as the value/growth needle swung back towards growth this time. Eastern markets were dull, Hong Kong and China both trod water while Japanese stocks fell.

Maybe Easter led to ‘a time for reflection’, it has been notable how much quieter the markets have been in the weeks following… The VIX Index of market volatility, having spent most of last year in the range 20 to 35 (it hit 82.7 in March 2020), sank below 20 this March and has been as low as 16.25 over the past couple of weeks.

The big US banks kicked-off the US reporting season as usual. JPMorgan, Morgan Stanley, Goldman Sachs et al produced excellent figures, significantly better than expectations, but almost all have struggled to make any headway since, a case of ‘travelling and arriving’. Wells Fargo have moved ahead, largely on relief that their rehabilitation can continue. But the banking sector has been overshadowed by the collapse of Archegos Capital Management, Bill Hwang’s New York based ‘family office’, and the revelation of the damage sustained by a number of banks. It appears that more than $10 billion has been lost, with Credit Suisse sustaining the most damage, followed by Nomura, shares in both being down around 20% over the period. A number of others including Morgan Stanley and UBS (a surprise announcement today), suffered losses though not as significant, Deutsche Bank, Goldman Sachs and Citibank appear to have ‘dodged the bullet’ with speedy action to close-out positions.

After last month’s rally, the US dollar has faded back down to February levels, leading to modest gains for sterling versus the dollar, but falls versus the euro, which has picked-up with some improving sentiment. The price of oil continues to recover, adding fuel to the fire of concerns for rising inflation, which we still expect to produce some ‘bumpy’ statistics this year as comparisons with 2020 work through the system, and emergency measures are unwound.

We are still expecting to see big improvements in growth this year against a backdrop of central bank support and strong savings, but the appalling resurgence of COVID-19 variants in India and Brazil (and Turkey, Poland etc) is a threat to be monitored closely. Perhaps stock markets could do with a bit of a pause to refresh…