Equity markets edged higher over the month. Growth stocks generally underperformed with the technology-heavy NASDAQ index posting a negative return. Investors remain focused on the threats of a vaccine-evading variant and the potential for tighter monetary policy to short-circuit the equity bull market. Both threats receded slightly during the month with vaccinations accelerating and bond yields stabilising. The fund returned 3.6% versus 1.6% for the MSCI Europe.

The Bank of England became the second major central bank to announce it was going to slow the pace of its asset purchase program. Bank officials were at pains to emphasise that the targeted stock of purchased assets would remain the same and the stance of monetary policy was unaffected. Whether this constitutes tapering, or not, is a question of semantics. Either way, the decision represents the first stage in an eventual tightening of policy. In response, GBP rallied against both USD and the Euro. The ECB meanwhile has recently accelerated its rate of bond buying under its Pandemic Emergency Purchase Programme (PEPP). With the economy rapidly improving as the number of vaccinations steps up, it will likely come under pressure from the ‘hawks’ to slow purchases. Indeed, it could be argued that the ECB has been undertaking a closet form of yield curve control under the guise of the PEPP.

As economies recover, central banks face a delicate balancing act as they withdraw stimulus. The paradox of QE is that the more successful policymakers have been in encouraging investors to purchase riskier assets, the more difficult it is to ‘normalise’ policy without a significant dislocation in markets. As Gertjan Vlieghe, an external member of the Bank of England’s Monetary Policy Committee noted, ‘What will ultimately tell us to what extent inflation pressures need a monetary policy response is the passage of time.’ Despite ongoing tension between markets and policy we feel this is more likely to be a 2022 issue for equity investors.

Alpha Financial Consulting rose as the company announced the acquisition of Lionpoint, a specialist consultant focused on the ‘alternatives’ marketplace. The deal extends AFM’s presence in the US market and elsewhere. Not only is Lionpoint a strong cultural fit, but it was acquired at an attractive multiple and offers significant revenue synergies. Despite the share’s strong recent performance, we think considerable upside remains. Lloyds gained as analysts revised their profit forecasts higher in response to the group’s positive 1Q21 update. The bank continues to benefit from the UK’s economic recovery with net interest margins resilient and a decline in loan loss provisions. Irish medical distributor, Uniphar, climbed as investors sought exposure to attractively valued growth stocks. The shares were also buoyed by takeover activity in the sector.

Menzies, a provider of aviation services, declined as the company announced a small placing to facilitate growth. In a trading update which accompanied the placing, current trading was revealed as being ahead of expectations with commercial momentum strong. Menzies, to put it mildly, has been a frustrating stock. We finally sense, however, that the business has reached an inflection point and is well placed to benefit from the uptick in air travel as pandemic restrictions ease.

Trading activity was limited.

Equity markets edged higher over the month. Growth stocks generally underperformed with the technology-heavy NASDAQ index posting a negative return. Investors remain focused on the threats of a vaccine-evading variant and the potential for tighter monetary policy to short-circuit the equity bull market. Both threats receded slightly during the month with vaccinations accelerating and bond yields stabilising. The fund returned 3.6% versus 1.6% for the MSCI Europe.

The Bank of England became the second major central bank to announce it was going to slow the pace of its asset purchase program. Bank officials were at pains to emphasise that the targeted stock of purchased assets would remain the same and the stance of monetary policy was unaffected. Whether this constitutes tapering, or not, is a question of semantics. Either way, the decision represents the first stage in an eventual tightening of policy. In response, GBP rallied against both USD and the Euro. The ECB meanwhile has recently accelerated its rate of bond buying under its Pandemic Emergency Purchase Programme (PEPP). With the economy rapidly improving as the number of vaccinations steps up, it will likely come under pressure from the ‘hawks’ to slow purchases. Indeed, it could be argued that the ECB has been undertaking a closet form of yield curve control under the guise of the PEPP.

As economies recover, central banks face a delicate balancing act as they withdraw stimulus. The paradox of QE is that the more successful policymakers have been in encouraging investors to purchase riskier assets, the more difficult it is to ‘normalise’ policy without a significant dislocation in markets. As Gertjan Vlieghe, an external member of the Bank of England’s Monetary Policy Committee noted, ‘What will ultimately tell us to what extent inflation pressures need a monetary policy response is the passage of time.’ Despite ongoing tension between markets and policy we feel this is more likely to be a 2022 issue for equity investors.

Alpha Financial Consulting rose as the company announced the acquisition of Lionpoint, a specialist consultant focused on the ‘alternatives’ marketplace. The deal extends AFM’s presence in the US market and elsewhere. Not only is Lionpoint a strong cultural fit, but it was acquired at an attractive multiple and offers significant revenue synergies. Despite the share’s strong recent performance, we think considerable upside remains. Lloyds gained as analysts revised their profit forecasts higher in response to the group’s positive 1Q21 update. The bank continues to benefit from the UK’s economic recovery with net interest margins resilient and a decline in loan loss provisions. Irish medical distributor, Uniphar, climbed as investors sought exposure to attractively valued growth stocks. The shares were also buoyed by takeover activity in the sector.

Menzies, a provider of aviation services, declined as the company announced a small placing to facilitate growth. In a trading update which accompanied the placing, current trading was revealed as being ahead of expectations with commercial momentum strong. Menzies, to put it mildly, has been a frustrating stock. We finally sense, however, that the business has reached an inflection point and is well placed to benefit from the uptick in air travel as pandemic restrictions ease.

Trading activity was limited.