Index data provided by Markit Group Ltd
i) YTD Returns: (to end April 2017)
Bond market returns updated monthly
Equities have had a very good opening 4-months with the €Stoxx50 returning a stellar 8.1% and the DAX some 8.2%. They both languished for much of 2016 before bit of a late comeback as we closed out last year. German equities particularly are in the ascendancy on hopes that the Eurozone is back on an assured growth footing. The FTSE hadn’t done too badly amid Brexit concerns and some currency volatility, but after being up 2.6% in the opening 3-months of the year, it has fallen back to return 0.6% in the period to the end of April largely on growth concerns.
The US stock indices have hit a multitude of closing highs in the 4-months to the end of April, but dithering over Trump’s geopolitical agenda, rate hike uncertainty and we think now growth concerns have prevented them going much higher – although forward P/E valuations are very stretched. With all that, +6.5% for the S&P in represents a very good effort!
In fixed income, Eurozone sovereigns overall total returns are at -1.1% with the performance worsening in April as yields backed up. While negative – it could have been a lot worse and is still a relatively decent performance given the potential for a growth, inflation and higher rate dynamic the asset class faces. After all, fixed income is going to feel some performance pressure in 2017.
In credit, the Markit iBoxx IG corporate bond index closed the month at B+121.8bp – or 8bp tighter in the month. Investment grade returns as measured by the index have improved to +0.6% for the 4-months from +0.1% for the quarter. The improvement came from all sectors non-financials (+0.6% to, for example), while financials have had the best of it and are up 1.15% in the year to end April.
The high yield market though is where the action is and tops the fixed income performance charts. Total returns for the year to end April are up at 2.7% (versus +1.6% to end March) and ahead of the sterling market where performance comes in at 2.6%. The latter is a longer-duration market and has benefited from the rally in Gilts, given that spreads are largely unchanged (market iBoxx index) this year. In euro-high yield, the shorter duration nature of the market has helped, but spreads have rallied hard, by some 70bp already this year.
ii) IG & HY Corporate Bond Total Returns
iii) Investment Grade Corporate Bond Total Returns
iv) High Yield Corporate Bond Total Returns