Last month saw George Osborne deliver his eighth budget as Chancellor of the Exchequer. Economic growth in the UK is forecast to be 2% in 2016, but this is down from the 2.4% forecast last November. A new sugar tax is being imposed on the soft drinks industry, with the income going towards funding for sport in primary schools. Other headlines include the forecast of a million jobs to be created by 2020 and a new ‘lifetime’ ISA to be introduced for under-40s.
Two days after the Budget was unveiled, Iain Duncan Smith resigned as Secretary of State for Work and Pensions after nearly six years in the role. His resignation came over planned cuts to disability benefits worth £4 billion. The role now belongs to former Welsh secretary Stephen Crabb.
Figures released by the Office for National Statistics (ONS) show that the UK current account deficit has reached a new high. During the last three months of 2015 the deficit came to £32.7 billion, equivalent to 7% of GDP in the quarter. The current account, which has been in deficit in the UK since 1998, measures the value of imports of goods, services and investment versus exports.
In the US, the presidential nominations continued, and now more than half of the US states have placed their votes. As of the end of March, Hillary Clinton is looking likely to secure the Democrat nomination with nearly 63% of the vote. Donald Trump leads the way in the Republican race with 737 delegates versus Ted Cruz’s 475 and Jon Kasich’s 143.
March was a positive month for developed markets. The FTSE 100 index rose +1.78%, while the FTSE 250 (ex IT) index and the FTSE Small Cap (ex IT) indexes gained +2.07% and +4.86% respectively. The US had a particularly good month, with the S&P 500 index returning +6.78%. In Europe the Eurostoxx 50 index climbed +2.11% and in Japan the Topix index increased +4.83% over the course of the month.
Emerging market returns were very strong. The MSCI EM (Emerging Markets) index surged +8.35%. Chinese equities, represented by the MSCI China index, and Latin American equities, measured by the MSCI EM Latin America GR index, soared +11.65% and +10.81% respectively. In India, the IISL Nifty index grew +10.75%.
Bond returns were mostly positive during the month. In the UK market, the FTSE Gilts All Stocks index slipped -0.13% but long dated (over 15 years to maturity) bonds rose +0.23%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, returned +1.41% and sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, returned +3.08%. High yield returns were also strong, as the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index posted gains of +3.82% and +3.40% respectively. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, climbed +3.34%.
Commodity returns were also favourable, as the S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, was up +4.93%. Brent blend oil, measured by the Oil Price Brent Crude PR index, grew +10.09%. The prices of gold and silver, measured by the S&P GSCI Gold and Silver indices, increased by +0.03% and +3.69 respectively. Returns in the agricultural markets were mixed, with wheat rising +4.47% and corn falling -1.54%.
In the currency markets, the US dollar and the Japanese yen depreciated against the pound by -3.04% and -2.63% respectively. However the euro gained +1.69% against the pound.