Ark Review of the Month
Global equity markets continued to perform strongly in April, with developed market equities returning 4.7%. In terms of regional distribution, the global indices continued to be led by the UK and the US, the two countries that led the global vaccination race with 51% and 44% vaccination rates. FTSE All-Share Index increased by 4.3% over the past month; while S&P 500 Index increased by 5.3%. The more cyclical markets, represented by the MSCI Europe ex UK Index and Japan's TOPIX Index, were relative laggards, returning 2.1% and -2.8% respectively. In terms of investment types, growth stocks increased by 6.3%, while value stocks gained 3.2% on average.
Fixed income markets were relatively steady. Prices of US Treasury and UK Gilts increased by 0.7% and 0.5% respectively over the past month. Global investment-grade corporate bond prices increased by 1.4% compared to the end of Q1.
Government bonds yield as of 30 April:
UK Gilt 10 Year @0.84%
US Treasury 10 Year @1.63%
German Bund 10 Year @-0.21%
The country’s reopening is on track so far. Indicators such as transport usage, card payments data and retail sales suggest that a recovery is building. Retail sales in the UK increased by 2.2% in February and 5.4% in March. While still around 1% below December’s level, the trend is clear and April’s figures are likely to show strong growth.
Forecasts for growth this year have been raised and confidence in the economy among households and businesses has improved. Economists have been revising up their expectations for growth in 2021. A recent Treasury survey of economic forecasters found that the average forecast for GDP growth was 5.7% in 2021, up from 4.8% in the previous month.
Since March 2020, the total household savings level in the UK has increased by £125 billion as consumption fell and incomes remained stable. The high level of household savings combined with growing consumer confidence may create a potential spending and investment boom in the near future.
At the same time, UK equities remain significantly undervalued, as evidenced by the increasing number of M&A bids for UK companies from private equity and overseas companies so far this year. The recent result season has shown that UK companies are performing much better than expected in terms of earnings.
Overall, the outlook for the UK stock market is positive. Most companies have started to consider cost savings and restructuring during the pandemic, shifting more of their business online. This has resulted in a gradual recovery in revenues and a more efficient operating model.
In the 2020/21 tax year, clients’ tax-free ISA accounts under Ark's management across a range of strategies all delivered positive returns. Over the same period of time, FTSE 100 Index increased by 28.55% and the UK Retail Price Index increased by 1.37%.
The new tax year started on 6 April and each investor would have received this year’s ISA investment allowance of £20,000. If you would like to make use of this year's allowance, our Investor Relations team would be more than happy to help.
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The views expressed in this update are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The views reflect the views of Ark Investment Management at the date of this document and, whilst the opinions stated are honestly held, they are not guarantees and should not be relied upon and may be subject to change without notice. Investments entail risks. Past performance is not necessarily a guide to future performance. There is no guarantee that you will recover the amount of your original investment. The information contained in this update does not constitute investment advice and should not be used as the basis of any investment decision. Any references to specific securities or indices are included for the purposes of illustration only and should not be construed as a recommendation to either buy or sell these securities, or invest in a particular sector. If you are in any doubt, please speak to us or your financial adviser as appropriate.
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