As 2021 rolled in after the Christmas that didn’t really happen, many wondered if another lockdown was on the horizon for Britain. It wasn’t long before prime minister Boris Johnson confirmed suspicions and moved England into lockdown in early January to protect the NHS from surging cases of coronavirus infections.
Also, after the initial relief that a “hard Brexit” – leaving the EU without any deal at all – had been avoided, businesses found themselves having to adapt to new rules and additional costs when importing and exporting to Europe.
By March, the Budget was on most people’s minds, with many wondering how the chancellor would recoup the £280 billion he had spent shoring up Britain’s economy during the pandemic. Some good news arrived that same month when the Organisation for Economic Cooperation and Development (OECD) upgraded its forecasts for global economic growth to 5.6% in 2021.
On the other side of the pond, America began the year like the rest of the world, struggling with Covid-19. But, as Joe Biden waited to take office in January, the attack on Capitol Hill sent shockwaves around the world.
The expression for 2021 seemed to be “expect the unexpected”, a point proven at the end of the quarter when the 200,000-tonne container ship Ever Given ran aground in the Suez Canal, sparking fears that it would impact the global supply chain.
Read on to find out how the regions across the globe fared during the first quarter of 2021.
UK
At the end of March, a year on from the first lockdown, Britain had clocked up more than 4.3 million confirmed cases of coronavirus and had suffered 126,000 deaths.
Yet more than 30 million adults had received their first vaccine dose, and after Europe’s threat to stop Britain from receiving vaccines came to nothing, there was a sense that the UK may be on its way to getting ahead of the pandemic through vaccinations.
The Office for National Statistics (ONS) reported exports to Europe dropped 40.7% in January, while imports fell 28.8%. It cited “temporary factors” as the cause, however, uncertainty around Brexit is likely to continue to be a factor.
In March, chancellor Rishi Sunak delivered his much-anticipated Budget, during which he froze many tax exemptions and allowances. Some accused Mr Sunak of a “stealth tax”, but investors approved of the Budget, resulting in the FTSE closing 0.93% higher later that day.
Over the first quarter, UK equities performed well, thanks mainly to a strong performance from the energy and financial sectors. The below chart shows the performance of the FTSE 100 since May 2020.
Source: London Stock Exchange
The Office for National Statistics (ONS) most recent unemployment figures – which is for November to January 2020 – is 5%, meaning 1.7 million people are unemployed. However, while unemployment fell slightly in January, economists expect unemployment to rise again throughout the year.
The IHS Markit flash manufacturing purchasing manager’s index (PMI), a measure of the manufacturing sector’s economic health, found business activity in March 2021 grew at its fastest rate since August 2020, rising from 49.6 in February to 56.6 in March. The stronger figures suggest the UK economy has shown greater resilience in the third lockdown than the first.
This was echoed by the OECD, when it upgraded the forecasted growth of the British economy to 5.1% for 2021, as opposed to the 4.2% it forecast in December 2020.
Europe
As a result of the vaccine roll out, the European Commission projected that Europe’s economy would grow by 3.7% in 2021 and 3.9% in 2022, after falling 6.3% in 2020.
European equities performed well in Q1, with hopes of a global economic recovery helping support sectors that were hit hard in 2020, which includes energy and financials.
The IHS Markit flash manufacturing purchasing manager’s index (PMI) for Europe reached 62.4, a record high. This signals strong growth, however, a rise in Covid-19 rates in some countries has thrown doubt over the recovery of some services, such as tourism.
US
At the end of the first quarter, the US central bank predicted stronger growth than previously forecast as vaccination rates rose and the government’s financial relief reached America’s economy.
The latter was in the form of President Joe Biden’s $1.9 trillion (£1.4 trillion) economic stimulus package that helped boost the performance of equities after a slow start in January.
The Federal Reserve also increased its forecast for average growth, increasing it to 6.5% in 2021 from 4.2% in December 2020.
While there were around 9.5 million fewer jobs in America in February, the government reported 379,000 jobs had been created, fuelling hopes the nation’s economic recovery was now underway.
Asia
While the OECD lowered its projected growth for China, it still forecasts it at 7.8% in 2021. The IMF forecasted China’s economic growth at 8.1% in 2021.
As Joe Biden took office in the White House, many wondered how he would deal with the “trade war” against China instigated by former president, Donald Trump. In March, trade representative Katherine Tai said the administration would not lift the tariffs but was open to talks with China. It seems hopes the trade war would end might be premature.
Japan’s equities performed well, in part due to the news that the country’s economy had expanded 12.7% in the fourth quarter of 2020. News the Tokyo Olympics look increasingly likely to go ahead could also be a boost for the country, although international spectators will not be allowed to attend.
Get in touch
If you would like to discuss your investments and their performance during Q1, please get in touch using our email admin@stonegatewealth.co.uk or by calling us on 01785 876222.
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