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May 2021
There have been three main themes dominating discussions throughout May, and these have resulted in a mixed performance from economies over the month. The continued easing of lockdown restrictions is fuelling a sense of optimism and expectation that the economy will recover, however the increase in demand and spending has raised concerns that inflation will be pushed higher. The continued risk of Covid-19 and the potential for new variants to cause problems has dampened some of the optimism and threatened to derail the lockdown easing.

Of the major equity markets, China and Europe led the way, with Japan and the US seeing some pull back in the month. The gold price increased for a second month, whilst both corporate and government bonds showed very little movement overall.

Market Round Up

Performance of major equity marketsMay 2021Year to date
UK (FTSE 100) 1.1%10.5%
US (S&P 500)-1.9%8.3%
Europe (MSCI Europe Ex UK)2.8%13.8%
Asia (MSCI Asia Pac Ex Japan)1.0%7.3%
Japan (Nikkei 225)-2.5%-3.9%
China (SSE Composite)3.9%2.9%

Source: Morningstar Direct

In the UK, the latest round of lockdown easing went ahead as planned and the economy began to open back up. The latest Office for National Statistics (ONS) data showed retail sales jumped 9.2% in April 2021 as people headed back to shops, bars, and restaurants. The ONS also reported the Consumer Prices Index (CPI) rose by 1.5% in the 12 months to April 2021, an increase of 0.7% from the previous month. This is due in part to rising energy, clothing, and petrol prices. The increases are causing inflation to rise and, along with the threat of the Covid-19 Indian variant, resulted in markets moving sideways over the period. The FTSE 100 moved above 7,000 at the start of May but has fallen back throughout the month before ending the month above 7,000 again.

Property prices continue to rise and the Nationwide Building Society report that the average house price in the UK has reached a high of £242,832, as more buyers search for bigger homes and gardens. Growth is expected to continue, in part due to the Chancellor extending the stamp duty holiday to 30 June 2021, but also as people are in search for larger homes to be able to work from home more comfortably.

It is expected that growth, overall, will continue throughout 2021, though all eyes will likely be watching to see whether the restrictions will be lifted on 21st June or whether this will be postponed.

Joe Biden continues to set out his plan for the US and his budget demonstrates his vision for the size and scope of the federal government. The budget will increase federal spending to $6 trillion in the coming fiscal year. The vaccination programme continues to move ahead, with around 63% of adults receiving at least one dose. The optimism from these factors is being masked by concerns surrounding inflation. The CPI increased 4.2% over the 12 months to April 2021, and this is the largest increase over a 12-month period since the period ending September 2008, and investors are wondering when the Federal Reserve may reduce their asset purchase programme or raise rates.

European markets have generally performed well over the period. Previous vaccine supply issues have faded, and the vaccine roll out is continuing well. There has also been agreement on plans to allow travel again between European countries and this will provide a boost to those economies. Moody’s believe
that households have excess savings of around €450 billion and are therefore in a good position as economies reopen. Whilst travel in Europe looks set
to reopen, concern surrounding the Covid-19 Indian variant has seen both France and Germany impose restrictions on travellers from the UK.

May has shown us that as economies begin to open, inflation is becoming a bigger concern. Also, Covid-19 remains a risk and one that will be discussed in the months ahead. Whilst developed economies are progressing with their vaccine programmes and beginning to ease restrictions, parts of Asia, that originally handled the outbreak well, are seeing rising cases and hospital numbers. New variants are also causing concerns and medical experts are watching the data closely to see how it plays out.

There is still optimism that is expected to continue throughout 2021, however investors are watching central banks closely for any signs of rate increases.

Performance of major equity markets over 1 year (01 June 2020 – 31 May 2021):

Performance of major equity markets over 1 year1 June 2020 to
31st May 2021
UK (FTSE 100) 19.5%
US (S&P 500)22.0%
Europe (MSCI Europe Ex UK)32.6%
Asia (MSCI Asia Pac Ex Japan)43.1%
Japan (Nikkei 225)14.8%
China (SSE Composite)23.8%

Source: Morningstar Direct

Risk Warnings
The following is a summary only of some key items in the Prospectus. Capital is at risk. Investors in Protected Cell Company (PCC) must have the financial expertise and willingness to accept the risks inherent in this investment. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds. The Master funds will be exposed to stock markets. Stock market prices can move irrationally and be affected unpredictably by diverse factors, including political and economic events. It should be appreciated that the value of Shares is not guaranteed and may go down as well as up and that investors may not receive, on redemption of their Shares, the amount that they originally invested. Investment in the Company should only be undertaken as part of a diversified investment portfolio. Investment in the Shares should be viewed as a medium to long term investment. Shares may not be redeemed otherwise than on any Dealing Day. There will not be any secondary market in the shares of the Company.

Regulatory Information
This material is for distribution to professional clients only and should not be distributed to or relied upon by any other persons. The Cells referred to are a cell of Marlborough International Fund PCC Limited (the ‘Company’), a protected cell company incorporated in Guernsey and authorised as a Class B Collective Investment Scheme under the terms of the Protection of Investors (Bailiwick of Guernsey) law, 1987, as amended. Investment may only be made on the basis of the current Prospectus, this can be found on the website Marlborough International Management Limited is incorporated in Guernsey. Registration No. 27895. Regulated by the Guernsey Financial Services Commission. It is not protected by any investor compensation scheme. Licensed under The Protection of Investors (Bailiwick of Guernsey) Law 1987. Guernsey Office: Town Mills South, La Rue du Pre, St Peter Port, Guernsey GY1 3HZ. Tel: +44(0)1204 589336.