Markets Remain Resilient Despite Yield Fears

Market highlights

  • Market focus likely to fall on the IMF and World Bank Spring meetings
  • Active management likely to drive portfolio performance as we head into earnings pre-announcement season
  • The economic recovery is well underway, but a crazy amount of uncertainty surrounds how it will unfold

The Week Ahead

It's a relatively quiet week ahead on the data front following the Easter weekend, and for numerous countries, the Easter Monday holiday means yet another shortened week for markets anyway. Nevertheless, the focus will be on the IMF and World Bank Spring meetings that will feature several prominent speakers, including Fed Chair Jerome Powell. 

Of course, the Covid-19 pandemic will remain in the spotlight over the coming week, as case numbers have risen noticeably at the global level over the last month, with Europe at the epicentre of risk.  

After month/quarter-end flows dominated price performances, plus a shortened week with no immediate catalysts post-US stimulus details, the current themes broadly hold. Still, as we move into April, active management is more likely to drive portfolio performance as we head into earnings pre-announcement season. Given the extreme moves occurring, it seems likely that price reactions to earnings will be keenly watched.  

Still, whatever suggestion there was about "everything being in the price" might not necessarily be the case. And by the looks of last weeks price action, there’s still potentially a long catalyst runway courtesy of the reopening and vaccine narrative – not to mention the arrival of those stimulus checks feeding directly into corporate profits, which is not necessarily reflected in earnings yet.    

Indeed, markets remain incredibly resilient despite all the yield fears.  

With the recovery well underway, there’s a crazy amount of uncertainty surrounding how it will unfold. The jobs recovery, fiscal and monetary policy uncertainty, and US GDP growth in 2021 are examples of these dynamics. The amount of uncertainty around the employment report is rather extreme, and there’s little agreement among economists on where the March employment figures will land. Growth is making a comeback but, again, there’s no agreement about timing, scale, or Fed policy implications. I guess at this point the only thing certain about the outcome is uncertainty itself.    

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