Market Commentary – March 2021

February 2021 Market Commentary

Overall, March saw a rebound across global stock markets, but there were various counteracting forces in motion.

Equity market volatility, as measured by the “VIX” index, generally fell relative to the preceding months, but remains higher than historical averages. In other words,expected volatility dropped, but still is higher than historical averages, indicating that choppiness and swings in equity markets are unlikely to end any time soon.

Much of the conversation between market-watchers has centered around whether inflation will reach unhealthy levels, given the large injections of money into the economy via fiscal stimulus, an expected uptick in consumer spending, and rising oil prices. Jay Powell, Chairman of the U.S. Federal Reserve, eased those concerns during the month by indicating that the Fed has no plans to hike interest rates through 2023 as he and the Fed board do not see rising inflation as a major risk to the economy.

In response, U.S. interest rates continued to tick higher, which weighed on fixed income and sukuk returns. Higher interest rates also continue to weigh on gold, which becomes less attractive to investors relative to fixed income as bond yields rise.

In the U.K., the British pound strengthened against the U.S. dollar. The exchange rate increased as high as 1.41, levels not seen since early 2018, as the U.K.’s economy continued in the second month of its post-Brexit path.



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