March 2021: a top month for equity investors

March 2021 was an exceptionally good month for equity investors in particular. Several equity markets reached record or near-record highs. On the downside, Asian equity markets and emerging markets lagged behind the US and Europe. Bond investors, too, had little to celebrate.

Reflation

‘Reflation’ dominated the financial markets in February (and, to a lesser extent, in January as well), and it was much the same in March. The prospect of an imminent strong recovery of economic growth, combined with a potential increase in inflationary pressure, worked out particularly well for equity investors once more. In March, investors in US and European equities were the ones who benefited the most. The US S&P-500 index reached new highs, hovering just below the 4000-point mark. On 30 March 2021, the Dutch AEX index closed above the 700-point mark for the first time in over twenty years (!), albeit falling just short of breaking the 4 September 2000 single-day record. For investors in Asian equities and emerging markets, the month was markedly less exuberant. The same was true for investors in technology equities, which had shown above average performance in previous months. On balance, the MSCI World Developed Markets index delivered a monthly yield of 6.1%, versus ‘only’ 1.3% for the MSCI Emerging Markets index. Within developed markets, a similar yield gap could be observed between US (MSCI North America index +6.8%) and European (MSCI Europe index +6.5%) equities on the one hand and Asian equities (MSCI Asia Pacific index +1.8%) on the other. For the first quarter as a whole, yield differences were less pronounced, with all equity regions returning between 7% and 10.5%.