Globally, Value outperformed in most regions followed by Quality, while long-term Momentum contracted through the quarter. Locally, Low Volatility was the best performing factor followed by Value, extending the Value rebound and flight to “cheap and safe” assets. Momentum, along with Quality, continued its contraction this past quarter. It remains to be seen whether there will be a rotation out of Value and into Momentum for the remainder of the year.
For the sub-components, Earnings revisions (-8.3%) showed strong negative returns through the quarter while Price Momentum (6.4%) experienced a rebound, with the net effect being a contraction in the Momentum factor. The Value components delivered through the quarter, with Price to Book (7.3%), Earnings Yield (2.4%), Dividend Yield (4.7%) and Price to Cash Flow (11.9%) all seeing gains. Growth (4.5%) showed positive returns for the period, while Profitability (-7.9%) and Leverage (-1.0%) continued to lag, making Quality one of the underperformers for the quarter. Low Beta (11.0%) and Low Vol (11.3%) extended their rallies from last quarter, while most local indices experienced positive gains.
Globally, stock markets ended the first quarter of 2021 in the green, with some emerging markets slightly in the red. Several countries went back to stricter levels of lockdown as third waves of Covid-19 gained momentum. Vaccine roll-outs have also been slower than anticipated, particularly in Europe, with several instances of vaccine related complications further slowing down the virus containment. Despite this, equities rounded out the quarter mostly in positive territory, with the US congress finally approving a historic fiscal stimulus package in March. There seems to be no slowdown in the global equity rally, with the MSCI World Index (4.9%), MSCI Emerging Markets Index (2.3%) and MSCI USA Index (5.4%) all gaining in net US dollars. Following a strong recovery late last year, the rand showed resilience through the quarter, weakening only slightly to the dollar (0.6%, closing at R14.76 to the dollar and R20.37 to the pound), but strengthening to the Euro (3.3% and closing at R17.34). This is a remarkable recovery of more than 23% since this time last year, where the rand traded north of R19.11 to the greenback as markets began pricing in the possibility of a virus induced global trade disruption.
The SA Reserve Bank voted to keep its repo rate unchanged at 3.5% in March to support the country’s recovery, with most economists agreeing that the only real short-term drivers of inflation would be the petrol price (which rates would do little to affect).
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