The Covid-19 pandemic continued to impact markets. Despite severe second and third waves in many parts of the world, markets delivered a strong first-quarter performance. Investors are anticipating a return to more normal economic activity as vaccine rollout strategies gain momentum. Virus mutations, vaccine efficacy and the duration of immunity remain risks to markets that have already priced in a recovery. The MSCI All Country World Index returned 4.6% for the first quarter of 2021 (Q1-21) after returning 16.3% during 2020. The S&P 500 Index returned 6.2% in US dollars for Q1-21. In Europe, the Euro Stoxx 50 rose +6.3%, despite stringent lockdowns across large parts of the continent.

Emerging markets (MSCI Emerging Markets +2.3%) underperformed their developed market counterparts (+4.9% as measured by the MSCI World Index). Within emerging markets, Turkey was a notable underperformer (-20.4% in US dollars), as President Erdo─čan replaced the country's central bank governor (again). This affront to central bank independence resulted in a weakening of the currency and rising bond yields. Herd immunity for emerging markets will generally come later than for their developed market peers, taking place in 2022 or 2023. Affordability, access to vaccines, and effective procurement and distribution strategies are all headwinds. South Africa, similarly, has had a slow start to vaccine distribution, with vaccine timelines being extended. Effectively leveraging all available resources across the private and public sector will be critical to achieving the herd immunity required for economic normalisation.

Global bond yields rose as confidence in an economic recovery gained steam. Pent-up demand from consumers sitting on high levels of savings, buoyed by economic stimulus and lockdown restrictions, brings inflation risk. The Barclays Global Aggregate Bond Index declined -4.5% in US dollars in Q1-21. In South Africa, the All Bond Index declined -1.7% in Q1-21. The rand remained steady against the US dollar (-0.6% in Q1-21). Resource shares delivered 18.7% for Q1-21, followed by industrials (+13.0%) and then financials (+3.8%).

The JSE All Share Index was up strongly (+13.1%) for the quarter and 55.6% since its March lows a year ago.+

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