Market Update May 2021

Market update

As you will see below in our Market Update May 2021, April was a relatively quiet month on the world’s stock markets. The FTSE did at one point go through the 7,000 barrier and although it ended the month just below that level, it was one of the world’s better performers.

The International Monetary Fund had started the month with an optimistic forecast. They predicted that the UK will have growth of 5.3% this year and 5.1% next year. Therefore, forecasts for global growth were upgraded to 6% this year and 4.4% in 2022.

Predictions of economic recovery

There were other, rather more anecdotal predictions of economic recovery this year. Bank of England deputy governor Ben Broadbent said the UK would see ‘very rapid growth’ over the next two quarters as people rush to spend the money they have saved during lockdown. Barclays boss Jes Staley went even further, saying that ‘we estimate the UK economy will grow at its fastest rate since 1948’. The bank unveiled profits more than doubling to £2.4bn for the first three months of the year.

That will certainly be the case if International Trade Secretary Liz Truss gets her way. April saw the announcement that the ‘vast majority’ of a trade deal with Australia has been agreed. The deal is expected to be concluded by June. It is believed that this deal could be a springboard for the UK to join the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) within the next 12 months.

Domestic economy

In the domestic economy, it was the construction sector leading the recovery. Figures for February showed that the UK economy edged up 0.4% in the month. This rise was driven by a 1.6% rise in the construction sector with both new builds and repair and maintenance doing well. At the end of the month Nationwide reported that house prices were 7.1% higher than a year ago. They reported that the average property now costs £238,831. One analyst said the housing market was ‘on the boil’. And, a story on the BBC reported particularly strong demand for property on the south coast, and on the coast of Wales as people looked to move away from cities.

Inevitably there was some gloom amid the positive noises about the recovery, principally centring on Government borrowing. Measures taken to combat the pandemic have pushed government borrowing to its highest level since the end of the Second World War. Borrowing hit £303.1bn in the year to March – nearly £250bn higher than the previous year. The only consolation was that the figure is £24.3bn less than the expected  £327.4bn.

What of jobs, the high street, and – sadly – the companies still making significant redundancies?

Defence giant Babcock announced that it would cut 1,000 jobs and Asda. Thanks to us all baking at home, Asda is to make 1,200 of its bakers redundant. The BBC also reported that 1 in 7 shops is empty post-lockdown.

More optimistically reports showed that shoppers had ‘rushed back’ to the national high street as it re-opened. The high street has a huge amount of ground to make up. Hammerson – the owner of Birmingham’s Bull Ring – will not be the only shopping centre owner to cut rents (by up to 30% in this case) in a bid for survival. Ominously, the month ended with online retailer Boohoo set to announce ‘soaring’ lockdown sales when it updates shareholders on May 5th.

…But overall April was a positive month for the UK economy, and the FTSE-100 index of leading shares reflected it. The market rose 4% in the month to close at 6,970. The pound was pretty much unchanged against the dollar in percentage terms and closed April trading at $1.3817.



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