The last few weeks of January 2021 saw global stock markets move higher. This was largely driven by the markets taking comfort from the continued Covid-19 vaccine rollout, with greater global supplies announced and further trials showing success, although continental Europe’s vaccine rollout has lagged.
The continued commitment of additional policy support, if required, from governments and central banks also added to market optimism. This was despite lockdown measures largely remaining in place or being tightened since Christmas.1 However, in the final week of the month, US markets (and to a lesser extent the UK and Europe) experienced a surge of volatility owing to the headline-grabbing antics of the retail (‘DIY’) investors who drove Gamestop’s share price significantly higher in a calculated bid against institutional investors, hitting market sentiment.
Data released in January showed that globally the Manufacturing Sector has largely continued to expand despite lockdown restrictions. However, globally the Service Sector still sees a much greater level of differentiation given the reliance on success in tackling Covid-19 but also the level of restrictions in place for many of these businesses to function. The European Service Sector improved after a difficult November but remains in contractionary territory. At the same time, the USA, Australia, China, and India are seeing continued expansion. Retail sales across the UK, US, and Europe saw general improvement as consumers continue to spend their Covid-19 savings, although current lockdown measures are maintaining savings rates well above their historic averages. Also encouraging was China, Germany, France, Spain, and the United Kingdom, all reporting better than expected GDP figures in their latest releases.
Continued strong economic performance by China supported equity markets in Asia Pacific excluding Japan (+3.42%), Emerging Markets (+2.97%) and Japan (+1.42%). While Europe (-0.80%). FTSE-100 (-0.82%) and the US (-1.11%) all moved lower, largely due to heightened volatility primarily in the US small equity space.
Sentiment around the end of the transition period, coupled with the comparatively advanced pace of the UK’s vaccine rollout saw sterling rise against the US dollar (+0.28%), euro (+0.93%), and Japanese yen (+1.64%).
Investment type performance breakdown
While Developed Market stock markets (Japan aside) fell, this was offset by a rise in Emerging Markets and Asia Pacific ex Japan. This saw equities rise overall (+0.25%). The decline in investor sentiment also weighed on property (-0.25%). Expectations of increased government borrowing to continue to support the economy, coupled with higher inflation expectations, saw bonds move marginally lower (-0.45%).
Summary with Plan details
Stock market gains were offset by property and bond market declines, meaning all Wealthify Plans saw performance in January move marginally lower. Those plans holding more bonds (such as our ‘Cautious’ portfolios)* saw a larger impact, while those with more equities (such as our ‘Adventurous’ portfolios) were less impacted. Our Investment Team will continue to actively monitor the financial markets and their impact on your Plan. And as always, we are ready to act in your best interests to events as they unfold.
*Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.