Quarterly market commentary - March 2021

In the context of a long term investment plan, a single year is not a very long time. That said, it’s difficult to write this particular report without reflecting, at least a little, on what an extraordinary year we have all just experienced.

Twelve months ago, we were about three weeks into our national Covid-19 lockdown, and this corresponding quarterly report was being drafted in a temporary home office.

At the time, the only thing we knew for certain was that, globally, we had been thrust into unfriendly territory. It was certainly a worrying time from a health perspective, with a pandemic raging, and this initially created a gigantic upheaval in investment markets. The immediate outlook was highly unsettled, and no one had any idea what would happen the next day, let alone the next month or year.

Apart from the age-old (but extremely appropriate) advice of not panicking, one of the points we stressed in that 2020 report was that share markets would be a leading indicator of the eventual recovery. What that meant was that share markets would start to improve well before we would see any clear evidence of improvement in the world around us. And so it proved.

In a global context, we are still a long way from being back to normal. Yes, vaccination programmes being implemented, economic growth rates recovering and the recent announcement of a travel bubble with Australia are all reasons for improving optimism. But, if we scratch a little deeper, we see that unemployment rates remain elevated, global supply lines are stretched, international travel is still challenging for many, and a significant third wave of the coronavirus is currently sweeping Europe and many emerging nations.

Some of these issues may take months or years to be settled, but forward-looking share markets are not sitting waiting. Quite the contrary. Share markets have generally been going from strength to strength. The quarter ending 31 March was no exception, as most share markets (excluding New Zealand – see Key market movements for more information on this) again performed well.

In fact, most share market returns over the 12 months ending March 2021 have also been well above average. This is partly because this recent 12 month period now excludes the negative returns experienced in February and March 2020 when markets fell sharply in the wake of the first wave of Covid-19.

In contrast to the ongoing resurgence in global share markets, fixed interest markets generally struggled during the quarter as government bond yields rose quite sharply.

Rising bond yields are often an indicator of rising growth and inflation expectations and, during the quarter, these lifted on the back of the continued global rollout of Covid-19 vaccinations, and expectations of ongoing economic stimulus.

The evidence available to us over the last 100 years of capital markets is that consistently and accurately forecasting the future is impossible.

In 2020 alone we experienced an unprecedented market decline in February and March, followed by an equally extraordinary rebound over the remainder of the year. To correctly forecast that outcome would have required not only the prediction of a global pandemic, but even more guesswork about how the share and bond markets (not to mention governments, businesses and individuals) might react to it!

Thankfully, one of Synergy’s great strengths is that it doesn’t rely on guesswork. Synergy portfolios are designed to provide different investors with a consistent means of efficiently gaining a level of risk exposure that is appropriate to their investment needs.

Overall, Synergy investors who held at least some consistent exposure to growth assets (e.g. shares) in their portfolios enjoyed a very good return for the 12 months ending March 2021. For those who simply stayed committed to their long term investment plans, this provided good compensation for having endured the unforeseen challenges of Covid-19 in the first few months of 2020.

Although we can’t necessarily expect another 12 months of strong double-digit share market returns, Synergy portfolios are, as always, very well placed to deliver the returns that the markets will ultimately make available.


For a detailed review of the asset class performances for the quarter, see ‘Key market movements’ or click here to view the full newsletter in PDF.



Information contained in this newsletter does not constitute personalised financial advice because it does not take into account your individual circumstances or objectives. You should carefully consider whether the Synergy investment portfolios are appropriate for you, read the applicable offer documentation, and seek appropriate professional advice before making any investment decision. The information in this newsletter is of a general nature only. Investors should be aware that the future performance of the Synergy investment portfolios may differ from historic performance. Details are correct as at the date of preparation and are subject to change. The investment objectives and strategies of the Synergy investment portfolios may change in the future.

While every care has been taken in its preparation, Consilium NZ Limited (‘Consilium’) makes no representation or warranty as to the accuracy or completeness of the information in this newsletter and does not accept any liability for reliance on it. The capital value, performance, principal, and returns of the Synergy investment portfolios are not guaranteed or secured in any way by Consilium, or any other person. Investments in the Synergy investment portfolios do not represent deposits or other liabilities of Consilium and are subject to investment risk, including possible loss of income and principal invested.