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Global Markets Overview: March 2021

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By David Hoile | March 31, 2021

Tracking recent asset price moves and our outlook

Our Global Outlook

Key Points for March

  • Biden’s $1.9tn spending package was passed by the Senate. At the same time, US nominal bonds have risen, reflecting improved expectations for US growth and inflation.
  • The market expectation of a first US rate hike has shifted from the end of 2023 to the end of 2022. While investors are expecting a slightly quicker pace of policy rate increases, the main reasons for rising bond yields have been: (1) the risk premium demanded by investors to hold government bonds has risen materially; and (2) expectations for future inflation have been rising.
  • Nevertheless, the Fed has maintained an accommodative tone: bond purchases will continue over the foreseeable future with no change in forward guidance on their first rate hike.

Key Market-Related Themes

What are the key market-related themes we think investors should focus on to position themselves for success during 2021 and beyond? From a macroeconomic perspective, we think three themes stand out:

  1. Policy shifts: The post-COVID policy regime has shifted in important ways. Whilst much of this shift was evident before 2020, the policy response to the pandemic has accelerated it. This has important implications for return pathways and downside risk management in particular.
  2. The rise of China: China’s financial system continues to open, which has material and near certain implications for the sources of diversity open to investors and how downside risk can be managed.
  3. Sustainability: This encompasses three important topics: climate; inclusive growth; and stewardship. In order to manage these imperatives, the need for better practices by governments, regulators, corporates, asset managers and asset owners is clear and growing.
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Senior Director, Investments

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