Global Market Overview – February 2021

After publishing some devastatingly high COVID-19 case numbers in January, the UK has turned its situation around and looks likely to be the first major economy to vaccinate itself out of lockdown. More than ever, we can see the light at the end of the tunnel. Over 20 million UK citizens have had their first jab, and daily cases in the UK have fallen from a high of 68,000 in January to around 6,000 at the end of this February. If all goes well, barbers and hairdressers will open on 12 April, in plenty of time to get a trim ahead of celebrating normality on 21 June.

It’s worth noting that niche areas of the financial markets are still making headlines. The GameStop, Bitcoin, Tesla froth continued into February with Bitcoin soaring to all-time highs, before falling sharply. We’ll continue to look at the long term, rather than becoming distracted by violent movements in localised areas, which we believe are largely a symptom of cash-rich gamblers with nothing to do during lockdown.

For the first time in a while, US treasury bonds made the headlines. Keeping an eye on them is hugely important as not only do they set an important benchmark for the risk-free rate of return, they are also an extremely powerful measure of investor sentiment.

This was demonstrated towards the end of February. The sheer pace of the rise in yields jolted equities as investors’ appetite for the highly valued US stocks was dampened. Popular names such as Alphabet, Facebook and Tesla dropped 3.2%, 3.6% and 8% last Thursday. As a result, the Dow Jones, S&P, and Nasdaq fell 1.8%, 2.5%, and 3.5% respectively on that single day. This largely wiped out positive returns for these indices for the month.

Investors fear a spike in inflation would prompt the Federal Reserve to shift away from expansionary monetary policy and raise interest rates – despite numerous central banks assurances to the contrary. We believe that any scares over inflation are just that; the world is not yet fully out of a crisis, let alone “running too hot”.

Things are returning to normal, and the conditions for a strong period of global growth are firmly in place. Once growth becomes really embedded, attention will turn to the low level of interest rates. At some point, central banks will have to begin a hiking cycle, despite what short-term signals they are giving. That day is still some way off as, although they are linked, market rates and base rates are not one and the same.

Core views

Policymakers will stay supportive… The world has never seen as much coordinated stimulus as in the past year– and the impact is yet to come. We believe this sets the stage for a strong economic recovery across the world in 2021. The return to growth will occur at slightly different paces in different places – much of Asia is already back on track, the US should have a vibrant start to the year, with Europe finishing strongly.

The post-COVID consumer will make up for lost time… Vaccination rollouts make the end of lockdowns real, and people are making big plans. Through a combination of savings, government support and job growth, consumers have never had more firepower following a crisis. Positive for credit and equity.


Investors should try to focus on the fact that investing in the stock market over the long term, is a powerful tool to preserve the purchasing power of their wealth and on ensuring that they have an appropriate asset allocation for the level of risk with which they feel comfortable. A disciplined approach to asset allocation and identifying good active managers who can navigate these conditions successfully remains of the utmost importance.

March 2021
With thanks to Seven Investment Management LLP for their views and market thoughts.
RiverPeak Wealth Limited

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