What has happened
Yesterday saw President Biden’s first speech to a joint session of Congress since taking power last year. The main focus of the speech was infrastructure and education with the American Families Plan being unveiled beforehand. This is a $1.8 trillion package funded through increasing the top rate of income tax to 39.6% and bringing capital gains tax in line with that level for households earning more than $1 million. The measures include free universal pre-school, tax credits and two years of free community college. The speech, as well as strong technology earnings, helped US equity futures rally after the US close.
Chip shortages
Apple posted strong revenues for the first quarter, ahead of expectations and stated that it was seeing strong double-digit growth in each of its product categories. Apple’s CFO Maestri did however warn that constraints around the supply of computer chips was limiting the sales of iPads and Macs which would impact revenues looking ahead. These chip shortages are a worldwide supply issue with many carmakers struggling to finish cars due to the lack of these key inputs. Yesterday saw Honda and BMW say they would need to pause production for a few days in May as a result of these shortages and Ford has reduced its earnings guidance as a direct result.
What doe we think
The semiconductor shortage has been in place for several months and Cisco estimates it will last for six months before gradually improving after that point. The pandemic is the primary cause of this shortage in supply however demand is also surging as consumers embrace the Internet of Things and semiconductors enter more and more everyday items. Whilst this may only be a short term disruption until supply chains react and additional capacity is built, this supply and demand imbalance in a crucial component increases inflationary pressures in the interim.
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World GBP | 0.0% | 1.0% | 4.1% | 7.8% | |
| MSCI UK All Cap GBP | 0.1% | 1.0% | 3.8% | 9.8% | |
| MSCI USA GBP | -0.2% | 0.5% | 4.7% | 9.3% | |
| MSCI EMU GBP | 0.3% | 2.0% | 5.7% | 9.1% | |
| MSCI AC Asia ex Japan GBP | 0.0% | 2.3% | 3.0% | 4.5% | |
| MSCI Japan GBP | 0.0% | 0.7% | -2.8% | -0.7% | |
| MSCI Emerging Markets GBP | 0.2% | 2.2% | 3.6% | 4.3% | |
| MSCI AC World IT GBP | -0.8% | 0.6% | 6.1% | 6.8% | |
| MSCI AC World Healthcare GBP | -0.3% | -0.6% | 3.5% | 3.3% | |
| Barclays Sterling Gilts GBP | -0.2% | -0.4% | -0.3% | -6.6% | |
| Barclays Sterling Corps GBP | -0.1% | -0.2% | 0.3% | -3.7% | |
| WTI Oil GBP | 1.4% | 4.2% | 3.8% | 29.1% | |
| Dollar per Sterling | 0.2% | 0.0% | 1.1% | 1.9% | |
| Euro per Sterling | -0.1% | -0.7% | -1.7% | 2.8% | |
| MSCI PIMFA Income | 0.0% | 0.5% | 2.3% | 4.3% | |
| MSCI PIMFA Balanced | 0.0% | 0.6% | 2.6% | 5.1% | |
| MSCI PIMFA Growth | 0.0% | 0.8% | 3.3% | 6.8% | |
Source: Bloomberg as at 29/04/2021. TR denotes Net Total Return
