Duncan Lawrie Online ▼

Posted on: 15 April 2015

March was a poor month for UK equities, which fell around 1.7%. Large caps bore the brunt of the selling, falling over 2.0%, partly because it includes a significant number of companies from the mining, oil & gas and finance sectors, all of which have been laggards in the first quarter. Mid- and small-cap companies fared better, especially smaller companies, which are more domestically-oriented compared to large caps. Despite fears around the UK General Election in May, UK economic data has been broadly encouraging, and this helped smaller companies to a fifth consecutive month of share price gains.

Other equity markets, such as the US and Europe, performed well, rising 2.6% and 3.0% respectively in sterling-adjusted terms. The latter continued to benefit from quantitative easing and improved sentiment from better-than-expected economic data, while the US edged closer to its first interest rate rise since 2006 after an impressive set of jobs figures. After an increase of 295,000 jobs in February, investors expected some clarity from the Federal Open Market Committee - led by chair Janet Yellen - as to when interest rates might be increased. However, the Fed managed to cause delight and despair in equal measure.

The first was achieved by removing the word 'patient' from the Fed's statement, which freed the Committee's hand to move interest rates within the next six months. Concern came from the Committee's changes to longer-term inflation and growth expectations, which were revised sharply lower. The net conclusion from these moves is that the Fed is likely to begin gradually increasing interest rates at some stage during the summer, but they may not go very high for very long.

In bond markets, UK Government gilts returned 2.0% during March, bringing their return in the quarter to 2.2%. The on-going QE programme in the Eurozone has pushed over 25% of the total Euro area government bond index into negative yields, demonstrating the impact of the ECB's negative base interest rate of -0.2%[1].

To read more news from The Commentary April 2015 edition please click here

[1] JP Morgan, Guide to the Markets Q1 2015.

All data has been compiled by Duncan Lawrie from sources believed to be reliable. Full details of sources are available on request.

The comments and figures in this document are generally applicable but you should always take specific advice to suit your individual circumstances before taking any action. Errors and omissions excepted.

The value of investments and income generated may fall as well as rise, and investors may not get back the  amount invested. Past performance is not a reliable indicator of future results.