Market Commentary – January 2021

January 2021 Market Commentary

Global stocks started out the year on a strong note, however, concerns around vaccine distribution and additional fiscal stimulus measures led to a modest drop in developed market equities, while emerging markets posted gains for the month.

Vaccine distribution rollout is well underway, yet not to the pace expected late last year; major U.S. cities have received ample doses, but are retaining vaccines for second doses per the direction of the CDC.

Meanwhile in the U.K., the COVID-19 lockdown continues as concerns remain around new, more contagious, strains of the virus that have spread through London. Unfortunately, not all vaccines are thought to be as effective on these new strains, raising concerns around the timeline of recovery.

Elsewhere, a group of retail investors came together to pump up the price of so-called “meme stocks,” forcing some hedge funds to close out short positions at sizable losses. Though this unprecedented volatility did not spill over into broader markets, the unusual nature of the coordination, and subsequent halts of trading by retail platforms, caught the eyes of the regulators who are concerned about retail consumer protection, as well as market manipulation. The “democratization” of day trading, through platforms such as Robinhood, has raised questions around whether this type of market manipulation is here to stay and what that means for the future .

As new stimulus measures are introduced, Treasury departments and Central Banks are balancing concerns around not doing enough to mitigate the economic effects of COVID-19 and potentially overheating the economy and causing inflation with trillions of dollars being pumped into the system. As expected, relative to the U.S. and Europe, Asian economies are experiencing a stronger economic recovery due to their ability to better manage the pandemic, a theme we will continue to keep an eye on in the coming months.

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