11th January 2021

Good morning,

2021 – what a year.
Those who hoped for a quieter 2021 have certainly been left disappointed after an action packed week which saw the Democrats take control of the U.S. Senate, riots and claims of insurrection on Capitol Hill, surging virus cases…and a positive week for equities. A healthy reminder that the drivers of investment markets and what is making headlines don’t necessarily match.

Clean energy stocks and financials surged last week on the expectation of increased green energy spend and fiscal spending in general as a result of a Democrat controlled Congress. Financials were a big beneficiary as the U.S. ten year yield moved to 1% for the first time since March last year. ‘Big Tech’ came under pressure as antitrust proceedings look more likely now. Social Media giants also faced increased scrutiny over their role in the events of last Wednesday in Washington DC.

We also have a new richest man in the world as Elon Musk overtook Jeff Bezos who has held the title since 2017. Musk started 2020 worth a paltry $25bn but is now worth over $200bn, driven mainly by the surge in Tesla’s share price.

Weekly Investment News
Equities took higher U.S. bond yields in their stride as the U.S. market closed at a record high on Friday. Real yields still remain in negative territory and there is a lingering expectation of further fiscal stimulus in the U.S. U.S. non-farm payrolls showed the economy lost 140,000 jobs in December which may increase the calls for further stimulus.

The political fallout from last Wednesday’s events continues with House Speaker Nancy Pelosi stating that Democrats will move to impeach President Trump for the second time in two years unless the 25th Amendment is invoked. Notably, impeachment would bar Trump from running for Federal Office in the future, whilst invoking the 25th amendment would not. In terms of the Georgia runoff result, the Democrats now have a razor thin majority with Vice-President elect Harris due to hold the casting vote. Therefore, it remains to be seen how radical an agenda the Democrats will be able to implement.

In addition to the U.S. jobs data, PMI releases were broadly positive in the U.S. Manufacturing jumped 3.2 points in December to stand at 60.7 as factory orders remained robust. Services data proved to be resilient also, surprising to the upside by coming in at 57.2. Adding to the positive sentiment, was oil prices with WTI above $50 per barrel for the first time since February 2020 as Saudi Arabia announced a production cut.

Sustained higher infection rates and logistical issues with vaccine rollout continue to weigh on eurozone sentiment, whilst the U.K. also entered a new national lockdown last Monday. However, eurozone equities moved higher and bonds lost value last week as a result of higher yields following the Georgia Senate elections.

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