The distribution of vaccines has accelerated in some countries along with the corresponding reopening of the economy, while other countries like India and Brazil continue to struggle with containing the virus. In March, the new US administration released its infrastructure spending proposal, which was generally well received by equity markets. Plans for additional fiscal spending along with improving economic data further fanned the fears of increased inflationary pressures causing yields on US Treasuries to continue their ascent. Developed equity markets rose given reopening optimism and on-going policy support with the rotation out of growth / tech stocks into value / recovery stocks persisting. Emerging market equities were, however, hampered by US dollar appreciation during the month along with some countries struggling to control the spread of the virus.
Overall, we remain positive on equity market risk, but recognize as markets continue to rise downside risk increases. The conditions that were in place to begin the year are holding steady. Recent policy announcements in the US are supportive, vaccine deployment is trending positively, and economic data remains resilient. Momentum in equities continues to be positive, as well. No particular areas of fixed income appear attractive. Our view on high yield remains negative as credit spreads have tightened even further. We have softened our view on commodities from positive to neutral, as commodity futures have rallied significantly, and inflation expectations priced in by the market may be overdone.