Client update - 29th January 2021

It has been a funny old week for markets and news flow. The row has already started within Europe about vaccine supply with threats to slow down the export from Europe of Pfizer vaccines to the UK, if Oxford / Astra does not agree to supply more of its vaccine to mainland Europe after announcing last week it would only supply a third of the expected jabs to Europe in the first quarter. It is very pleasing to see the UK doing so well in the global vaccination charts year to date, although the slower response in Europe must add further doubt as to how quickly we can start to move around Europe later in the summer. This week Priti Patel has spoken at length about the plans for limiting travel into and out of the UK for some time to come. Just a few weeks after Brexit negotiations ended, the UK is starting to feel isolated from Europe more quickly than we might have imagined.

One of the more eye-catching market developments this week has been the ongoing “battle” between day traders in the US and various hedge fund professionals. Via social media, retail investors have been calling for each other to purchase stocks shorted by US Private Equity firms (shorting a stock allows the hedge funds to make money should the stocks fall in value). This action has led to wild swings in some key stocks being purchased by day traders, including Gamestop that was up 134% on Wednesday alone and cinema chain AMC was up 300%! This price movement would have been very painful for the hedge funds betting against the stock and this development is sure to lead to increased scrutiny from Washington. These stock movements have forced the hedge funds to sell their more liquid larger stocks to cover their losses and this fed into a leg down in the overall US equity markets later on Wednesday. We have written in the past about disruptive forces in the investment market, particularly algorithmic trading, and this new trading style borne out of social media groups may well lead to an investigation from the US Securities and Exchange Committee and further regulation.

As I write, Joe Biden has now spent his first week as the 46th President of the United States. He has many challenges ahead of him, but also an exciting plan that has the potential to create some real investment opportunities away from the tech stories of the last five years. His positioning of Janet Yellen at the US Treasury should ensure a stable relationship with the Federal Reserve and this is so very important in maintaining the confidence in a global recovery in 2021, backed by widespread vaccinations and central bank liquidity. The challenges for the new administration are well documented, particularly in respect of the very thin majorities the Democrats hold in Congress. However, the policy agenda is ambitious and the speed at which a number of executive orders have already been issued is impressive. At the global level it is encouraging that the US will re-engage with the international community on climate change by re-joining the Paris Agreement and in combatting the COVID-19 pandemic through active participation in the WHO. Domestically, Biden has already demonstrated a new level of urgency on the pandemic front, tightening up rules on wearing masks and pledging to massively increase the vaccination programme in the US.

Dealing with the pandemic remains a pre-requisite for a strong 2021 for global markets and for now, we continue to watch the developing vaccine news with great interest.