After a strong start to the month, most equity markets gave up their gains as the month came to a close. Developed market equities ended the month down 1%, although emerging markets significantly outperformed, ending January up about 3%. Initially, the global roll out of vaccinations and the promise of further fiscal and monetary stimulus helped the market to overlook concerns about virus driven restrictions. Stimulus expectations rose after the surprise Democratic sweep in the run-off election for the two Senate seats in Georgia, which completed Biden’s blue wave.
Over the month though concerns about delays to the supply of vaccines to Europe increased, raising the possibility that the route out of the pandemic may be longer than expected.
Despite delays in Europe the vaccine rollout is progressing well in the UK and US and there was positive news from both the Novavax and Johnson & Johnson vaccine trials, particularly in relation to preventing hospitalisation.
Robust economic data and a moderate winter wave of Covid infections continued to support risky assets in north Asia. Strong returns from Greater China contributed to the outperformance of emerging market equities.
Defensive assets, such as high quality bonds, were on the back foot in the first weeks of the month. But as risk assets sold off, government bonds regained some of their losses, with the ten year treasury ending January down 1%.
Shane Fereday DipPFS