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April Review 2021

Summary

Financial markets were without much to dampen investors’ spirits.  With the exception of the Japanese equity market, developed stock markets had a good, positive month. Other asset classes were relatively stable and exhibited less volatility.

Acronym city

April is noted for showers, but depending on where you live, has been one of the driest on record.  It was also officially the sunniest and frostiest April on record.  Financial markets were also without much to dampen investors’ spirits.  With the exception of the Japanese equity market, developed stock markets had a good, positive month.

Other asset classes were relatively stable and exhibited less volatility, a welcome relief for investors given the past fourteen months’ price movements.  Bond yields stabilised, and like currencies, were subdued compared to their recent oscillations.  Metals, especially the industrial kind, had a good month.

In the UK, the impressive vaccine rollout continued to aid the relative performance of UK equities, notably smaller companies, on the world stage.  India, by contrast, struggled to cope with a further Covid-19 wave, demonstrating what happens when events are opened to large gatherings ahead of vaccinations.

US President Joe Biden’s proposed American Family Plan, which includes a near doubling of capital gains tax to just under 40%, created a short, downward interruption to the positive US equity momentum in April.

The ‘value’ vs ‘growth’ rotation which had dominated relative equity returns since the first vaccine announcement on November 9th 2020, ebbed as most sectors were well into positive territory in April.

Interest rate policy in developed economies shows little chance of any change in the near or medium term even as expected stronger growth numbers kick in, supply chains appear tight and worries over inflation persist.  No matter, equity markets were undaunted in April outside of Japan.

In the final week of April, some of the largest US companies reported first quarter 2021 earnings with many beating lofty estimates.

What’s in a Name?

The final week of April also brought a new brand to the market.  Many including ourselves, were left wondering whether ‘Abrdn’ was a spoof story, causing many to check if it wasn’t the final week of April but the first of the month.

If part of brand launch is to grab attention, then ‘Abrdn’ did that.  We will never speak ill of any competitors, but you do wonder what the branding agency were influenced by. Perhaps they, like many, have become fixated by the acronyms peppering each episode of Line of Duty?  But while we have been instructed to pronounce ‘Abrdn’ as Aberdeen, you could also pronounce it as ‘a burden’.

In appealing to a younger cohort, sometimes be careful what you wish for.  Although I’m not the target demographic, I rather preferred ASI – call me old-fashioned.  In fact, it sounds similar to KSI, a well-known British YouTuber who chose a three-letter acronym instead of Olajide Olayinka Williams Olatunji, his full name.

ESL

Another acronym in the news in April and another headscratcher was the attempted formation of the ESL (European Super League) by a select group of European football clubs.  The amateurish, perhaps arrogant approach by a group of supposedly professional club owners, many of whom have been successful in other industries, was hard to fathom.

At least most of the English club owners had the good grace to apologise for not taking the players and fans on their intended journey.  The fans let them know their feelings.

ESG

One acronym that stays in the investment headlines and is likely to remain there is ESG, or to give it its full title, environment, social, governance.  We believe ESG can be encompassed in our preferred heading, ‘Responsible Investing’. As signatories of the UN Principles for Responsible Investing since the start of 2020, we believe the clue is in the title.

Too often ESG is a catch-all phrase for products that might permit some providers to invest in the ‘best in class’ oil company for example.  Such large, institutionalised behaviour is tantamount to greenwashing and has no place in our investing philosophy.

Asset Allocation

Bonds may have had a better month, but neither government nor corporate debt offer value, and are unlikely to, as monetary policy is likely to keep interest rates below inflation to help deal with the debt mountains accumulated during the pandemic.

In equities, we retain our focus on the cheaper areas and themes with the best growth prospects over the medium to long-term.  We are conscious of earnings forecasts becoming overly optimistic in the future and smaller companies’ excellent outperformance of larger companies.

Trying to trade in and out of these themes after periods of strong performance is a fool’s game, and as long-term investors, our eyes are on delivering investors’ objectives over years not months.

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