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We have had a lacklustre start to the week thanks to the US markets being closed on Monday (18 January 2021) for Martin Luther King Jr. Day, coupled with Joe Biden’s inauguration as President today – although an inauguration isn’t normally a market moving event, given the potential for protests across America, it is getting a lot more attention than usual.
As it has been a quiet week so far on the economic data front, we thought we would address the issue which has recently appeared in many of the business pages of the press: are equity markets in a bubble that is about to burst?
In the words of the Von Trapp children in the Sound of Music, “So long, farewell, auf Wiedersehen, goodbye.”
Not only have global equity markets started the year in an exuberant mood, but the FTSE-100 has literally leapt out of the starter gates this week (as we write, the FTSE-100 is up just over 3% today, taking its gain so far this week to 5.50%).
Given the lack of any significant economic data releases so far this week, global equity markets have been fairly muted and remain hostage to the tug of war between vaccine optimism and further stimulus versus the growing number of coronavirus cases that is still being fought.
It’s been a volatile week for equity markets, as they continue to take two steps forward and one step back, as world leaders race to reach agreements, on stimulus and post Brexit trade relations.
Although November ended on a downer as the FTSE-100 fell just over 100 points (nearly 1.6%) on Monday (30 November 2020), overall November delivered some fantastic equity market rallies: the FTSE-100 rose 12.35%, while in the US the Dow Jones climbed 11.84% and Japan’s Topix ended the month 11.12% higher.
The equity market theme so far this week has been the same as the last few weeks.
With the US Presidential election effectively settled, coronavirus is again the main driver of global equity markets.
We have previously stated that while the US Presidential election was important, it is progress on a coronavirus vaccine that will have a far greater impact on global equity markets as a vaccine will allow economies to fully reopen and thus speed up the economic recovery.
