Please see below update received from Brooks MacDonald earlier today, which analyses global market performance over the past few days.
What has happened
With US markets closed yesterday, equity moves were fairly small and we saw more of a consolidation than any momentum one way or another. That said, European and Asian markets did gain ground with the latter helped by the strong Chinese GDP data at the start of the week.
Yellen’s confirmation hearing
Later today, Janet Yellen, former Fed Chair will set out her plan to the Senate finance committee ahead of her confirmation as Treasury secretary. The prepared remarks have already been leaked and the highest profile phrase is that ‘the smartest thing we can do is act big’. Yellen is expected to reiterate the need for fiscal spending saying that the downturn in the economy could lead to a ‘longer, more painful recession’ if stimulus bills such as that proposed by President-elect Biden falter. The first test for the new President will be the passing of $1.9 trillion of relief measures which may prove challenging given the tiniest of working majorities in the Senate. There will inevitably be questions about the longer-term funding of the deficit created by these measures and the interactions between the Fed and Treasury given Yellen’s former role.
COVID Update
Cases remain elevated across Europe but there are signs that the tougher restrictions are starting to work with Italy seeing its daily cases fall below 10,000 for the first time this year and the UK dipping below 40,000 as Lockdown 3.0 takes effect. Germany is also expected to extend its lockdown further due to concerns over the new variants after being in heightened restrictions for several months. On the vaccine there continue to be impressive numbers out of the UK which is one of the fastest moving of the major economies. The EU are also seeking 70% of the bloc’s population to have had the vaccine by the summer so signs of momentum, or at least ambition, building. In less positive news, California’s state epidemiologist has recommended the pause of the rollout of the Moderna vaccine after severe allergic reactions.
What does Brooks Macdonald think
Yesterday saw a brief lull in market activity after an eventful start to 2021, with central bank meetings, politics and earnings this is unlikely to last too long. Against this backdrop the vaccine rollout has begun in earnest which means that with each passing day the economic risk of reopening marginally reduces. Of course, the question for governments will be what proportion of the population needs to be vaccinated before the risk of the virus is ‘acceptable’, expect this to be a major debate in Q2 2021.
Please check in again with us soon for further relevant content and news.
Stay safe.
Chloe
19/01/2021