Market Outlook Report – February 2021

Market Overview

UK Reaches Brexit Trade Deal with EU 

After months of complex negotiations, the UK and EU agreed a deal on December 24th that came into effect at 23.00 GMT on December 31st. The deal defines the rules on how the UK’s new relationship with EU will work. The FTSE 100 hit its highest point since March when markets first opened after the deal was announced, gaining 137 points by midday.

Relevance/ Impact 

Biden’s Inauguration Marks a Return to Predictability

As Financial Times rightly points out, although the new President does not represent a return to normalcy yet, as we edge closer to the 12-month mark of the pandemic, we can expect more predictability in his administration. Many see this as a positive for markets, which have endured years of volatility brought on by Trumps impulsiveness and extensive use of Twitter.

Relevance/ Impact 

Vaccine Boosting Markets

Since the beginning of 2021 markets around the world have rallied at the news of successful vaccine rollouts, presenting potential opportunities for investors heading into the rest of the year. Israel and the UAE are currently leading the world at rolling out the vaccines, followed by Bahrain and the UK, and the response of their respective markets should hopefully be an indication of what is to come. With the UK Government on track to vaccinate the top four priority groups by mid-February, there is a feeling of optimism that the FTSE 100 will maintain its rally and UK markets will continue their recovery into 2021.

Relevance/ Impact 

Largest Rise in Unemployment Since the Global Financial Crisis

Unemployment rose to 5% from 4.9% in the three months to November, as COVID-19 continued to hurt the jobs market. The Office for National Statistics released figures showing 1.72 million jobless, the highest level in five years and 418,000 more than in the same period the previous year. The largest loss of jobs was seen in those sectors worst hit by the pandemic restrictions, such as hospitality and retail, with those aged 25 to 34 facing the biggest risk of losing their jobs as a result.

Relevance/Impact

Investor concern mounts over rising markets.

With markets floating on an unprecedented wave of monetary and fiscal support, bond yields at near historic lows, and investors sitting on piles of excess cash, fund managers are on alert for a market pullback. Rallying stocks and speculation by amateur investors is resulting in growing concerns among market veterans that a bubble is forming to rival anything seen in the past century.

Relevance/ Impact 

Retail Investors Battle with Hedge Funds

In one of the most intriguing stories around investment markets, amateur traders using the ‘Wallstreetbets’ Reddit page have pushed up GameStop’s stock price exponentially, in a move to inflict heavy losses on some high-profile hedge funds holding short positions on the stock. GameStop’s price has now risen over 400% since Friday, totalling over 1900% rise Year to date.

Relevance/ Impact 


Date of article: 5/02/21

Disclaimer: This document represents the opinion of Reeves Independent only and is not intended as advice and no investment decisions should be made solely on the back of this email. Always seek independent financial advice before taking any action. Past performance is not a guide to future performance. All investments carry the risk that you will get back less than you put in.

Sources:

Business Standard (24th January 2021) Israel, UAE quickest in Covid vaccine rollouts, push their markets to top
https://www.business-standard.com/article/international/how-fastest-vaccine-rollouts-by-small-countries-is-fuelling-market-gains-121012400248_1.html

Financial Times (25th January 2021) Moderna develops new vaccine to tackle mutant Covid strain
https://www.ft.com/content/c0c8f72c-e58e-4319-80c4-0db153ad85db

Interactive Investor (29th December 2020) How the UK market and investors reacted to Brexit deal
https://www.ii.co.uk/analysis-commentary/how-uk-market-and-investors-reacted-brexit-deal-ii514611

Financial Times (January 25th 2021) Investor anxiety mounts over prospect of stock market ‘bubble’
https://www.ft.com/content/a790c796-f0c4-4cf9-8c7a-3b52daff89e4

BBC News (28th January, 2021) GameStop: Is buying frenzy starting to lose steam?       https://www.bbc.co.uk/news/business-55837519

FT (28th January 2021) Hedge funds retreat in face of day-trader onslaught   https://www.ft.com/content/4f76d769-4460-450f-9373-1e54f7da6c19

FT (25th January 2021) Joe Biden brings a welcome return to normal https://www.ft.com/content/72387f76-deaf-4dd7-bf2c-eadb414e792a

Independent (20th January 2021) What is the Green New Deal and how does Biden’s climate plan compare? https://www.independent.co.uk/environment/climate-change/green-new-deal-what-is-biden-summary-aoc-b1790197.html

BBC News (26th January 2021) Big rise in redundancies among young people https://www.bbc.co.uk/news/business-55808052