With the UK, US and European economies going into lockdown, March was a very poor month for equities. As measured by the FTSE All Share Index, UK equities produced a negative return of 15.1%. The FTSE 100 index of the largest companies produced a negative return of 13.4% outperforming the more domestically focussed FTSE 250 Index of medium-sized companies which produced a negative return of 21.7%.

The travel & leisure and general retail sectors were particularly badly affected by the lockdown. City of London’s exposure to these sectors was reduced and included complete sales of the small holdings in Cineworld, William Hill and Marks & Spencer. In contrast, food retailers received a boost to sales and additions were made to City of London’s stakes in J Sainsbury and Wm Morrison. Overall, defensive holdings in the portfolio were added to, such as consumer staples companies and utilities, where there is, in our view, least danger to dividends.

There is now a considerable monetary and fiscal stimulus in place and potential for a sharp economic recovery once the lockdown is ended. Signs of progress in containing COVID19 are likely to be needed before a sustained stock market recovery can take place.