It was a challenging month for both global equities and bonds. The escalation of the conflict in Iran has created great uncertainty about global supply chains and energy security, while increased inflation expectations are affecting market participants.
The equity portfolio corrected somewhat downwards, and there were some major differences in performance at regional level. Asian equities and emerging markets fell the most, followed by Europe. The US fell somewhat less.
There were also major differences in developments at sector level. Energy was the only sector to show a positive trend, as a result of significantly higher oil prices throughout the month. Manufacturing, consumer goods and materials were weakest in what can otherwise be described as a broad decline.
The fixed income portfolio was also in correction mode. As a benchmark, the broad S&P Global Developed Aggregate Ex-Coll Bond Index fell by 3.3 percent, impacted by the US 10-year yield moving from 3.95 to 4.31 percent in March.
Despite geopolitical turmoil dominating the news and inflation expectations having risen significantly in recent weeks, earnings expectations have not yet changed much. Analysts are probably in a wait-and-see phase, given that the path towards a lasting solution in the Middle East is highly uncertain. Annual earnings growth is expected to be close to 20 percent in the US and 11 percent in Europe. Here, it is reasonable to assume that estimates will fall in the future. However, the fact that a greater breadth of earnings growth is expected, so that it is no longer driven solely by technology companies linked to artificial intelligence, is a positive signal. With the reporting season for the companies’ first quarter just around the corner, we are in for an exciting spring.
Sincerely
Stein Frode Aaseng
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