Results season went into full swing in March and in general companies were able to meet or beat expectations. This was undoubtedly aided by the fact that forecasts were heavily cut at the height of the pandemic and had been upgraded more gradually, however it was enough to maintain the positive momentum in the market. The budget was largely a non-event from an investment point of view, with most of the important announcements well flagged in the press beforehand. Domestically all eyes remain fixed on the re-opening of the economy and the market seems content to look through any hiccoughs in the vaccine rollout, with a general belief that the government will largely stick to its roadmap out of lockdown. The UK is also looking increasingly attractive when compared to other global economies given the expected pace of recovery and the receding uncertainty around post-Brexit trading. This has helped fuel continued demand for UK cyclicals with small caps also outperforming large caps, both positives for our portfolio. The continued rise in the US long bond yield has put inflation firmly on the radar for investors, adding more momentum to the value rotation and leading to increased investor interest in our investable universe. With the much talked about unwind in the domestic savings ratio expected over the next few months, we are optimistic that this increased appetite will continue.
Our top performers in the month were a diverse group, but the common denominator was increased confidence as the UK economy re-opens. Our top performer was Mortgage Advice Bureau buoyed by a strong set of results, strength in the housing market and the launch of a Mortgage Guarantee Scheme in the budget. Similar sentiment also pushed the housebuilders higher, with Bellway, Vistry and Crest Nicholson all performing well. Halfords and DFS were beneficiaries of the re-open trade, as was Redde Northgate whose Redde business has been suffering from a lack of cars on the road during lockdown. The exception to the trend was Zegona which rose on the back of a recommended bid for its core investment, Spanish telecoms business Euskaltel. We have seen a pickup in the number of bids across the market, and we expect to see more as confidence continues to improve. There was no real theme to our negative contributors on the month with Provident Financial falling after announcing a strategic review of its Consumer Credit Division and Diversified Gas & Oil and Moneysupermarket giving up some of their recent gains.