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Market Report

Market Report 

The graph below summarises the index returns on the main asset classes/regions for the year to 31 March 2017. Returns are shown in sterling terms and local currency terms.


Equities delivered double digit returns across the board. Bonds and property delivered positive returns with UK index-linked gilts performing particularly well.  Further details on the performance of specific asset classes over the period are provided below.


Global equities rebounded strongly following a tumultuous start to 2016. UK equities rose, posting a return of 22.0% over the 12 months to March 2017 – the most by any region in local currency terms. This was despite the volatility caused by the Brexit vote and the uncertainty of its future impact on the UK economy. Many companies listed on the UK stock exchange earn overseas revenues and the outperformance of these stocks provided a major lift to large cap stocks. The best performing sector was basic materials (67.9%) while the telecommunications sector (-10.0%) was the laggard and the only sector to post negative returns.

US equities outperformed other regions in sterling terms. Macroeconomic data was positive especially in the second half of 2016, whilst prospects of fiscal spending under the new US administration bolstered the equity market. A strong earnings season in early 2017, especially for financials, was also supportive.

Continental European equities returned 18.5% in local currency terms whilst sterling weakness in 2016 brought the sterling return up to 27.9%. Signs of economic recovery and the ECB’s accommodative monetary policy provided a boost to equity markets. Concerns over the banking sector, Brexit and European elections curbed investor enthusiasm for the region.

Despite posting double-digit returns over the 12 month period, Japan was the weakest performing region in local currency terms, as concern over the effectiveness of the Japanese government economic programme and yen strength up to the summer of 2016 hurt exports.

Emerging market performance picked up in local currency terms as the Chinese government stimulus supported Chinese growth. Concerns over protectionist policies under a Trump presidency and higher US rate expectations were shrugged off.  Macroeconomic fundamentals in emerging markets also improved over the year. Overall, emerging market equities performed well.


UK fixed gilts returned 6.6% and index-linked gilts returned 19.9% over the period. UK gilt yields fell dramatically up until the summer of 2016, with an acceleration following the Brexit result and subsequent monetary easing undertaken by the BoE. From August, however, there was a turnaround in gilt yields as inflation expectations increased. This upward yield move reversed somewhat in 2017 as the reflation trade lost momentum with UK yields trending lower with other markets. Longer dated fixed interest gilt returns performed better than those with shorter maturities. The same was true for longer dated index-linked gilts.

Index-linked gilts outperformed fixed gilts at all maturities as index-linked yields fell more due to a sharp rise in inflation expectations as sterling weakness, UK economic resilience and commodity strength boosted inflation expectations.

Globally, most corporate bonds posted slight positive absolute returns in sterling terms as credit spreads (the difference between the yields on non-government bonds and equivalent maturity government bonds) narrowed over the 12 month period. In the UK corporate bonds returned 9.2%, outperforming fixed interest gilts following better than expected economic data and the BoE’s extension to corporate bonds in its asset purchasing programme.


UK Commercial property returned 3.9% over the 12 month period to March 2017. The Brexit vote and the potential impact on the UK economy weighed heavily upon momentum in the UK commercial property market. Commercial property prices continue to recover following the capital value losses in the aftermath of the EU referendum result, but still remain below pre-Brexit levels. Property valuations continued to rise on the back of high transaction activity. Rental growth was also positive, albeit less so than capital growth.


Infrastructure as an asset class generally performed well over the last 12 months. Investor appetite for Infrastructure continued to increase following strong demand the previous year. Global infrastructure fundraising was weak in the first part of 2016 but increased significantly later in 2016.