The UK’s vaccination programme continues to rapidly scale up, with close to 500,000 doses administered on Saturday 23rd January, and more than 6.8 million in total. This is around 10% of the population and crucially includes nearly 75% of over-80s and two thirds of elderly care home residents, who between them represent the largest portion of the most vulnerable:
The majority of the UK’s doses are manufactured domestically, meaning less impact to supply, and while some controversy still surrounds the Government’s strategy to stretch the time between first and second jabs, thus far the vaccine roll-outs are a great success story for Britain:
Assuming vaccines remain effective and roll-outs well organised, we should be in a position very soon to start rolling back restrictions, and allowing those hardest hit hospitality, leisure and entertainment sectors to make up for much lost time, aided by significant government support. We see a risk developing that restrictions are kept in place for much longer than may truly be needed, which will dampen the outlook for economic recovery and therefore prospects for financial markets. The reasons behind the authorities’ reticence to normalise more quickly are obvious, but each day that we do not, allowing the view that Covid is the only risk that must be managed above all others to become increasingly entrenched, more permanent economic, health and societal damage is done.
Elsewhere, President Joe Biden took office on 20th January and immediately issued a sweeping set of executive orders relating to matters from Covid to immigration, several of which reversed or refashioned many of his predecessor’s most criticised policies. We still await the advancement of the $1.9tn stimulus bill through Congress, which, despite now enjoying a Democrat majority, will still be tricky to see through.
As last week in markets, Asian and Emerging Market equities outperformed all other regions, rising by 2.7% and 1.9% in Pound terms respectively, though most equity markets were positive for the week. The US gained 1.3% as investors broadly reacted positively to President Biden’s first actions, and PMI business survey data was robust; the composite measure incorporating data from manufacturing and services businesses rising in January.
European and UK equities were flat or negative for the week, losing again in relative terms as lockdowns were extended or reinforced, despite the UK’s vaccine picture being positive. As a region, the UK is still showing good absolute and relative performance since vaccine announcements were made in November 2020, rising ahead of the US and Asia since then, but these gains risk being unwound if lockdowns continue indefinitely.
Government bonds proved lacklustre again, with UK Gilts falling by 0.3% and inflation-linked Gilts by 1.4%, though corporate bonds eked out small gains. Gold and silver prices both rose; the former by more than 2% and the latter by 0.8%.
This week has started relatively quietly but it would be prudent to expect more volatility to appear. Corporate earnings season is in full swing which will be most important to gauge sentiment on a forward-looking basis, and we shall be paying close attention to any trends that may arise.
Market views are from Oliver Stone – Fairstone Head of Portfolio Management (25th January 2021)
The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The views expressed in this publication represent those of the author and do not constitute financial advice.
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