What’s happened in markets?

FTSE All Share -0.5 3.8 16.4 3.1 -7.0 0.0 7.1
Euro Stoxx 50 0.1 3.2 13.9 1.6 -1.9 2.7 7.1
S&P500 2.0 4.3 11.7 2.3 17.8 12.8 17.3
Japan Topix 0.0 5.5 14.8 2.9 9.0 1.7 8.6
MSCI Asia Pac 3.4 13.6 23.4 9.3 33.9 9.4 18.5
MSCI Emerg. Mkts. 2.6 11.6 22.8 7.9 25.7 6.8 17.5
Jo’burg All Shares 0.7 9.2 17.1 7.8 13.7 4.9 9.4
UK Gov’t Bonds -0.3 -1.8 -0.2 -1.7 4.0 5.0 4.7
US Gov’t Bonds 0.1 -1.0 -0.8 -1.0 5.9 5.2 3.3
Global Corp. Bonds 0.0 -0.4 1.9 -0.7 6.2 6.4 6.1
Emerg. Mkt. Local Currency Bonds -0.3 -0.5 5.2 -1.3 2.8 2.6 6.8

With Johnson & Johnson’s vaccine expected to have sufficient data to analyse and emergency authorisation by the end of February, the world would be able to accelerate inoculations, not least as the drug only requires one shot versus the two needed by the AstraZeneca, Moderna and Pfizer jabs1. So far, of the G20, the UK has made the most progress, with 10.2% of the population vaccinated, followed by the US at 6.2%. Europe is lagging, and no country has reached 5% with many, including France and Germany, below 2%.

In economic data releases, the US weekly initial jobless claims came in at 900,000 on 21 January2, which was lower than the 935,000 expected. Meanwhile, the EU’s December consumer price index (CPI) showed that the Eurozone was in deflationary territory, with prices having fallen by -0.3% year-on-year1. The UK also released its latest CPI figures, with prices rising by +0.6% in December. Finally, purchasing managers’ indexes slid across Europe, with the composite Eurozone figure falling to 47.5, below the 50 mark that separates expansion from contraction. The US numbers, on the other hand, were stronger than expected, with the composite reading coming out at 58.0.

The US presidential inauguration saw Biden attempt to reset the White House tone against an “uncivil war” and sign an array of executive orders to reverse various Trump policies3. These included stopping the United States’ withdrawal from the World Health Organization, rejoining the Paris climate accord, a federal mask mandate, ceasing the border wall construction, and an end to the travel ban on a number of Muslim-majority countries. Meanwhile, Janet Yellen was confirmed as treasury secretary.

In terms of style, growth stocks [+3.00%] reversed the performance of recent weeks to outperform value stocks [-0.70%] as the reflation trade unwound slightly. Among sectors, communication services [+4.25%], information technology [+3.40%] and consumer discretionary [+3.15%] outperformed. Among regions, Emerging Markets equities [+2.02%] have been doing well of late. In fixed income, while government bond yields were pushed higher, credit and shorter-dated maturities were the best classes to be invested.

Latest Consensus Forecast
UK GDP (QoQ) 16.0 -2.0
UK PMI 40.6
UK CPI (YoY) 0.6
EU GDP (QoQ) 12.4 -2.2
EU PMI 47.5
EU CPI (YoY) -0.3
US GDP (QoQ) 33.4 4.3
US PMI 58.0
US CPI (YoY) 1.4 1.3
GDP = gross domestic product; PMI = Markit purchasing managers’ index; CPI = consumer price index

What’s happened in portfolios?

Within equities, Dodge and Cox trailed a bit as cyclical and value stocks underperformed, while our strong position in Emerging Markets was very helpful, given we added to our position in November and December.

Our bond funds outperformed more than the market given US bonds remain the pick of the advanced economy sovereign bond markets, a bias that we have maintained.

Within the alternative investment strategies, while our commercial property portfolio is being impacted by the latest UK lockdown, our other alternatives ended the week of 18 January mostly positive, albeit generally quiet. The only news came from both care home providers in that about 80% of residents and staff in their homes would have had their first vaccine by Friday 22 January, with the rest due to be completed by the end of January. And Hipgnosis announced further acquisitions of the royalties for Shakira, Michael Bublé and Neil Young songs, which has prompted the team to embark on another round of capital raising.

What’s happening this week?

27 Jan • Fed meeting | Q4 GDP updates | 122 S&P500 firms’ earnings update