15th February 2021

Good morning,
Former U.S. President Donald Trump was acquitted on Saturday by the U.S. Senate, in his second impeachment trial over the events that took place on 6th January. The acquittal means the President is still legally allowed to hold Federal Office; a point not lost on supporters who are now calling for him to run in 2024.

Whilst that is a good bit in the future, it is always worth remembering that stocks are forward looking as airline stocks have enjoyed a strong start to February. The sector, which was decimated in the Spring of 2020, is benefiting from optimism about a return to ‘normal’ in the latter half of the year. However, it remains to be seen if air travel returns to pre-pandemic levels. Business travellers (by far the most profitable passenger segment) are increasingly cost and climate conscious and some of the evolution in how people have done business in the last year look set to remain. Although, all this is unlikely to impact on the estimated 80% of the world’s population who have never been on a plane.

Finally, a large portion of the global population celebrated Chinese (or Lunar) New Year on Friday. The ‘Year of the Rat’, which began on 25th January 2020, proved to be devastating for the world from almost every perspective, so here’s hoping for better luck from the ‘Year of the Ox’.

Weekly Investment News
Equities finished the week in positive territory as strong earnings and the prospects for U.S. fiscal stimulus buoyed markets. In terms of sectors, communication services outperformed, led by positive earnings releases from Twitter. It is now expected that aggregate earnings on the S&P will grow year-on-year, which would signal a very quick recovery when compared with previous economic cycles. 80% of earnings so far this quarter have exceeded expectations.

There was much market commentary following the latest U.S. inflation report, which showed prices rose 0.3% in January. However, that was largely due to rising energy prices whilst the ‘core’ metric (which strips out food and energy prices) was more subdued. Despite this, expectations for future inflation are trending higher as both U.S. business and consumers expect to see price rises in the future. Speaking on Wednesday, Fed Chair Powell assuaged any concerns that the Fed may act early to keep inflation in check, stating policymakers remain committed to low interest rates and continuing the asset purchase programmes.

European economic data was mixed as U.K. Q4 GDP surprised to the upside, rising 1% quarter-on-quarter. Optimism was tempered by the fact that the annual figure saw a fall of 7.8% – the sharpest contraction in modern times. Eurozone industrial production also provided a lacklustre reading. In Italy, former ECB President Mario Draghi looks set to unite parties across the political spectrum and form a national unity government.

Vaccine rollout programmes continued worldwide with President Biden announcing on Thursday that the U.S. has procured 200 million additional vaccine doses. Within Europe, Germany has extended lockdowns until March and a number of countries are considering border controls as virus case numbers remain high amidst the vaccine rollout.

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