Stock Market review
US
This week wasn’t a great week for US stocks with all 3 indices closing down for the week and the S&P 500 closing for its worst week since October - erasing all its gains so far this year. Much of this can be put to the increased volatility in trading this week which has led to some investors reducing risk and increasing cash allocation.
The month of January didn’t fare much better for US stocks with the Dow and S&P 500 closing the month down, while the Nasdaq was the only index to finish up, thanks partly to a relatively better month for tech stocks.
Weekly Returns: Monthly Returns:
S&P 500: Down 1.11%. S&P 500: Down 3.31%
Dow: Down 3.27% Dow: Down 2.04%
Nasdaq: Down 3.49% Nasdaq: Up 1.42%
Want to know what each index is? You can find out here
Europe
Europe ended the weekly lower as concerns Concerns around the potential economic damage from a new strain of the coronavirus in Europe and delays to vaccine rollouts have dented sentiment in the past few days.
Europe also had a poor month with all 3 major indices down with the last week of the month wiping out gains made earlier this month.
Weekly Returns: Monthly Returns:
FTSE 100: Down 4.3% FTSE 100: Down 0.82%
DAX: Down 3.18% DAX: Down 2.08%
Stoxx 600: Down 3.11% Stoxx 600: Down 0.8%
Finance
Boohoo have nought Debenhams out of administration for £55 million.
What’s involved in the deal?
The deal only includes the department store’s brand assets, eCommerce and website operations, and all own-label products across beauty and fashion. This means the remaining 118 stores of Debenhams, which went into liquidation less than two months ago, would permanently shut down, effectively making at least 10,000 staff out of work.
The bigger picture?
The acquisition by online clothing giant Boohoo points to the ongoing trend of the death of the high street and the rise of online clothing which has been exacerbated by Covid-19. In the past year, retail giants such as Arcadia Group, Laura Ashley and victoria secrets had fallen into administration. Arcadia and Debenhams, however, have been bought by online giants Asos and Boohoo respectively and they represent the future of retail with the rise in online shopping and e-commerce leading to the flourishing of both companies.
The IMF has warned that financial markets are complacent and exuberant — a formula that raises the risk of a correction. This has been backed by Jeremy Grantham, chief investment strategist at Boston-based asset management firm GMO who believes that the stock market bubble is set to burst any minute and that it’ll tumble by at least 50% when it does.
in the first three weeks of 2021 to 22 January, companies raised a record $64bn through initial public offerings and secondary equity offerings, according to the Financial Times and figures from Refinitiv. This doubled the amount raised in the same period in 2020.
US-based special-purpose acquisition companies (SPACs) saw a sixfold year-over-year increase in 2020 after raising $82bn, according to the Wall Street Journal. The main winners were banks such as Credit Suisse Group and Citigroup alone accounted for 30% of underwriting, while Goldman Sachs also took a large share of the activity.
Assets under management in exchange-traded funds claiming to support environmental, social and governance principles tripled from $59bn in late 2019 to more than $174bn by the end of 2020
The International Monetary Fund (IMF) has sharply downgraded its 2021 growth forecast for the United Kingdom. The IMF on Tuesday slashed 1.4 percentage points off a prediction made last October, saying it now expects the UK economy to expand by only 4.5% in 2021.
Apple announced better-than-expected results late on Wednesday, raking in over $100 billion of quarterly revenue for the first time.
Politics
The EU has apologised for invoking a Brexit deal clause to prevent coronavirus vaccine shipments entering the UK.
What happened?
After realising that Astrazeneca would not be able to fulfil the vaccine doses promised in the contract, the EU tried to force AZ into halting supplies to the UK in order to male up their orders for the EU. However, after widespread condemnation from London, Dublin and Belfast, the EU backtracked, acknowledging it was in the wrong.
What’s the bigger picture?
The broader issue at play here is that this embarrassing moment highlighted one of the pitfalls of the EU - its bureaucracy and inefficient logistical ability. While the UK acted fast to secure doses in December, the EU delayed, waiting for further assurances before ordering doses. This slow approach to dealing with orders highlights one of the reasons why the UK left the EU with the ability to move at its own pace allowing it to act with speed in fighting this virus. The short-lived act by the EU to restrict supplies to the UK could have also potentially weakened relations with the Uk as it would have been undermining the GFA agreement in Ireland which was such a contentious point in negotiations.
The impact of Brexit is already being felt as Credit card giant Mastercard is set to raise by fivefold the fees it charges EU merchants when UK cardholders buy goods and services from them online.
The public's trust in the way the UK is run is breaking down, former Labour prime minister Gordon Brown has warned
Brexit British fishermen have accused Boris Johnson of dishonesty and betrayal over his Brexit fishing deal in an angry letter from the National Federation of Fishermen’s Organisations which accuses him of submitting to a “neo-colonial relationship with the EU on fish for long into the future”.
The EU has again criticised the UK's decision not to give the EU ambassador to London full diplomatic status
The House sent over the article of impeachment of former President Donald Trump to the Senate Monday evening, officially starting the countdown to a trial expected to highlight the rifts within the GOP over Mr Trump’s legacy and his future influence over the party.
Italian Prime Minister Giuseppe Conte is set to hand in his resignation on Tuesday, following criticism of his handling of the coronavirus pandemic.
Weekly Portfolio review
Trial Portfolio Holdings: Slack, Snap, Peloton, Docusign, Teladoc, NIO, Shopify
Week 3 of my portfolio was overall a negative one with all but one stock securing weekly declines. This was due to the large amount of volatility in the market his week which saw investors manage their risk by taking capital off the table, especially in the overvalued tech stocks space. It will be interesting to see how tech stocks perform in February and if a sell-off is still on the cards.
Portfolio Returns:
Week 1: 8.77%
Week 2: -1.95%
Week 3: - 4.75%
STD (start to date): 5.99%
Biggest Gainer: Teladoc - (+)1.93%,
Biggest Loser: Docusign - (-)8.65%
Podcasts
This week’s podcast is Friday’s FT news briefing which explained the short squeeze which happened in the stock market this week and the fallout which has occurred since as well as looking at the future of ESG investing
You can access the podcast with this link:
Stat of the week
61 - The number of SPACS created this year. SPACs are special purpose acquisition companies and they have been in popular demand since last year where SPACs have raised $79.87 billion in gross proceeds, surpassing the record $13.6 billion raised in 2019. If the economy and IPO market remain strong this year, we could see another blockbuster year for SPACs.
Quote of the week
“Luck is what happens when preparation meets opportunity.” - Seneca
When looking at the lives of successful, we. can all see points in their journey where luck and fortune favoured them - whether that was meeting someone by chance or being in the right place at the right time. But what we fail to see sometimes is that these were only opportunities and it was their preparation which allowed them to take advantage of these opportunities. So in whatever you’re doing, make sure you do it to the best of your ability and be prepared, because you don’t know what opportunity is around the corner!
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great content. really useful