Market snapshot: tailwinds are in abundance
A recovery in February from a sell-off in January continues as investors grow increasingly optimistic.
15th February 2021 08:51
by Richard Hunter from interactive investor
A recovery in February from a sell-off in January continues as investors grow increasingly optimistic.
Anticipation is slowly growing as the fight against the pandemic progresses, underpinned by financial support from governments and central banks in repairing scarred economies.
The glass is certainly half-full in the US at the moment, with the S&P 500 and Nasdaq again hitting record highs.
Tailwinds are in abundance, with a significant stimulus package looking increasingly likely, a strong earnings reporting season and an accelerated vaccine rollout programme each stoking generally positive sentiment. In the year to date, the Dow Jones is now ahead by 2.8%, the S&P500 4.8% and the Nasdaq 9.4%.
US markets will be closed for Presidents Day (as are the Chinese and Hong Kong markets for the Lunar New Year holiday), leaving other geographies and asset classes to take up the reins.
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Hopes of increased demand in the coming months along with controlled supply has been positive for an oil price which has risen by 22% in the year to date, and which has seen a further small spike following some concerns around fresh tensions in the Middle East.
Meanwhile, better than expected economic growth numbers, coupled with an imminent rollout of the vaccine was positive for the Japanese market, which is showing strong signs of recovery.
This generally brighter sentiment has, for the moment, reached UK shores. The government appears on track to meet its vaccination milestone, which is hoped to be a precursor to the lifting of restrictions and therefore the ability of the economy to begin growth under its own steam. The initially positive reaction to the news leaves the FTSE 100 index ahead by 2.9% in the year to date.
In the meantime, the full-year reporting season for the UK banks kicks off on Thursday with Barclays, followed by NatWest on Friday. There will be particular focus on any return to the payment of dividends following last year’s holiday, while there are also hopes of a read across from the experience of the US banks in the recent reporting season of lowered debt provisions.
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