Reopening is coming steadily closer

The stock markets continued to rise in March, in line with a reopening of the economy appearing steadily more likely. Despite new lockdowns, the vaccination news is uplifting.

For the month as a whole, the American S&P 500 Index rose by 4.4 per cent measured in USD, while the European Stoxx 600 Index jumped up 6.5 per cent measured in EUR and the Nordic VINX Index climbed 2.3 per cent measured in NOK. Here in Norway, the Oslo Stock Exchange Benchmark Index (OSEBX) rose by 5.1 per cent.

One last lockdown?

We have seen new lockdowns in the EU and Nordic region, but despite the difficult scenario at the moment, the vaccine roll-out seems to be going as expected. Among other things, it can be seen that the number of new persons infected by COVID-19 in the UK has fallen by all of 94 per cent. Britain was previously badly affected, but its rapid vaccination rate shows the developments that  other countries can also expect. The USA has accelerated its vaccination programme too, while Europe is expected to speed up its vaccination programme in the next few weeks.

New support packages

We have seen massive fiscal policy support in order to help economies during lockdown periods. This particularly applies in the USA. Shortly after the latest fiscal policy stimulus package was agreed to, President Joe Biden is already discussing the next package, which is intended for infrastructure. This package will cover a much longer period, but we will probably also see its effect in the next few years.

A focus on the base effect

Both higher growth and increasing inflationary expectations have raised the interest rate level. Over the next few months, we will probably see inflation accelerating as a result of base effects, since commodity prices, for instance, were weak last year. The question going forward is what will happen after the temporary effects stop. Many people expect inflation to fall again, while the built-up demand and stimulus effects indicate that prices will remain high in the second half-year too.

The road ahead …

Despite the current snapshot, we seem to be heading towards a reopening of the economy, so we expect investors’ positive mood to last. That’s good news for shares and equity funds.

It's very, very difficult when you have to prepare for something that might not ever happen.

Anthony Fauci