Market Update

Monthly Market Roundup January 2021

8 February 2021
Monthly Market Roundup January 2021
Overview
1.
1
Early optimism pounded by a 2020’s death rattle
2.
2
President Biden sworn in but not before the ignominy of the US Capitol being stormed
3.
3
Retail traders take the battle to Wall Street, provoking panic and a spike in volatility

After a strong start to the year, early optimism was pounded by a combination of factors, which felt alarmingly like the death rattle of 2020.

Early hopes that the vaccine rollout was continuing apace in some countries had to be balanced against the still surging virus, with new variants and renewed lockdowns putting fresh downward pressure on already struggling economies.

In addition, some high-level squabbling between the EU and its now former member, the UK, around the availability of vaccines caused some ugly headlines. While the UK raced ahead in its vaccination programme, faltering efforts in the EU were being met by some pockets of violent protest.

More locally, politics was also back on the agenda in Italy, where an all too familiar series of resignations, wobbly coalitions, power struggles and ideological disputes signalled a new period of uncertainty.

In the US, the President Biden was sworn in relatively hitch free as fears were raised following the debacle earlier in the month, which saw protestors storming the US Capitol, some would say at the behest of former President Trump.

Having wrestled control of the Senate with Senatorial race victories in the state of Georgia, the Democrats appear to have a mandate to deliver on their priorities. The fact that this includes a simply massive pandemic relief package of $1.9 trillion dollars helped US markets higher.

However, US markets were led for some unexpected turmoil when retail traders went into a David(s) vs Goliath battle against the Wall Street giants. Taking bets opposing hedge fund short positions in a number of unloved stocks, an army of retail traders managed to inflict severe losses on the big boys. Volatility spiked and markets dipped as hedge funds scrambled to cover short positions.

Read our review of the global markets

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • All data is as at 31 January 2021 unless otherwise stated.

    This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.