NatWest Invest

Latest investment update

Quarter 1 2021: Strong Recovery Shines Light on Stocks

Investment highlights from 1 January to 31 March 2021

At a Glance

  • Stocks rise as government and central bank support does its job
  • Vaccine roll-out boosts investor confidence
  • Bonds have challenging time as prospect of higher inflation cuts prices

Market Matters

Three developments this quarter relevant to NatWest Invest

1)    American dream

US stocks were boosted by President Biden’s $1.9 trillion economic support package passing through both houses of Congress.

Our view: The package is widely expected to turbocharge the world’s biggest economy, which should in turn benefit the rest of the world.

2)    Rule Britannia

UK stocks are doing well. Britain is home to a number of companies that tend to prosper when the economy grows – as it is now – such as energy companies and banks.

Our view: The UK has been unloved by investors for a while and looks fairly cheap as a result, providing good opportunities. The country’s successful vaccine roll-out should also be good for its stock markets.

3)    The price of bonds

Bond prices dropped as investors saw the possibility of higher inflation on the horizon. Economic growth can lead to a higher cost of living but a bond’s interest payments stay the same, so they lose value.

Our view: Bonds, particularly government bonds, are likely to remain less popular than shares as an improving economy supports company profits. But today’s extremely low interest rates, which are likely to remain for some time, should support bond returns.

“Governments have shown continued willingness to support their economies, and central banks have re-iterated their intention to keep interest rates low. When combined with the progress on the virus, it’s not surprising that record economic growth is widely expected in developed markets in 2021.”

Sven Balzer, Head of Investment Strategy at Coutts, which runs the NatWest Invest funds.

Managing Your Money

Changes the experts at Coutts made this quarter

Sold Chinese shares, bought UK stocks

We banked profits from our position in Chinese companies after a period of good returns. We’ve used some of that money to buy more UK stocks as we see the economy there continuing to improve.

Added to UK government bonds, reduced US Treasuries, emerging market and investment grade bonds, and gold

We bought more UK government bonds, which should benefit from the Bank of England keeping interest rates on hold – something Coutts believes they will do for quite a while.

We also took profit on US government bonds (US Treasuries), which have done well over the last year. And we sold out of some other investments with limited prospects currently – namely emerging market bonds, investment grade bonds and gold.

When investing, past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.

The degree to which these developments will affect your investment’s performance depends on which NatWest Invest fund you hold.

View our previous investment updates

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