OCM Commentaries

Market Commentary 11th February 2021

By February 11, 2021 February 15th, 2021 No Comments

After a shaky start to 2021, global equity markets extended their recent rally over the week, marking a strong start to February as investors digested improving corporate earnings data and encouraging vaccine rollout progress across the globe. Despite continued short term uncertainty owing to the pandemic, this week investors mulled the potential for more US stimulus amid mixed economic data, while the EU revised growth and recovery expectations to reflect the progress of vaccine rollouts across the bloc.

Slow Vaccine Rollout Delays EU Recovery Expectations

Facing strong criticism over its slow vaccine rollout, the European Commission cut its forecast for Euro-area growth in 2021 to 3.8% from 4.2% over the week. In making the forecast, the Commission said that its predictions “crucially” hinge on virus containment measures starting to be eased during the second quarter of the year, before being largely phased out by the end of the year. According to the commission, despite the cut to 2021 growth, if those assumptions hold as the vaccine rollout gets underway, the economy is expected to reach its pre-crisis level in mid-2022, earlier than previously anticipated. Still, the recovery is expected to be uneven, with countries such as Spain and Italy likely to take longer to recover.

Despite the cut in the 2021 growth forecast, the outlook remains favourable, with growth expectations of 3.8% in 2021 and 2022 likely to provide a welcome boost to European equity markets as the economy recovers. The region has started the year on weak footing due to lockdown restrictions and slow vaccine rollouts, however with financial conditions expected to remain accommodative well into the future while valuations appear attractive as company fundamentals start to improve, our outlook on European risk assets remain positive moving forward.

Weak US Labour Data Strengthens Case for More Stimulus

The January US nonfarm payroll data released on Friday highlighted continued weakness in the US economy, undermining the US’ 2021 economic recovery somewhat. Having lost 227,000 nonfarm payrolls in December, the disappointing labour market performance continued in January, with only 49,000 jobs added to the US economy over the month, against the expectation for 105,000 jobs to be added. Alongside this, the 49,000 jobs added came solely from the rehiring of public-school employees, implying a zero net improvement in the rest of the job market.

Although the economic data was disappointing, equity markets responded positively due to increased expectations for a large stimulus bill, closer to Biden’s goal $1.9 trillion mark. The bill’s details are not yet disclosed; however analysts expect it to include a direct payment of $1,400 to individuals, which will help to support the livelihood of those on low incomes and unemployed. That being said, analysts have now begun to discuss the possibility of rising inflation rates in 2021, as the combination of accommodative policy and the release of pent-up consumer demand start to drive up the prices of goods and services.

For more information on the US’ employment data, and its impact on stimulus, inflation, and future policy, please refer to the market update attached.

Financial Services Talks Hit Stumbling Block

Developments over the week suggest that talks to determine the post-Brexit relationship between the UK and the EU have stalled, with the governor of the Bank of England labelling the EU’s requirements to grant market access for financial markets so far as ‘unrealistic’. Mr Bailey’s comments highlight the gulf between the UK and the bloc around so-called equivalence rulings on whether each side’s rules are robust enough to enable seamless access for financial services. Talks slated to end in March centre around finding a path forward for cooperation, with failure to achieve equivalence likely to add complexity and disruption to the finance industry, one of the key pillars of the UK’s economy. It remains in the best interests of both sides to achieve equivalence, however the EU’s stance that the UK should essentially accept its rules goes against the UK’s best interest, with the UK looking to diverge slightly from EU regulations, while still seeking to maintain high regulatory standards. Talks are still ongoing, and we remain hopeful that the two sides can co-operate to secure a mutually beneficial agreement based on common regulatory standards.

Key Events We Are Watching This Week:

  • Friday: UK Q4 GDP Growth rate, Industrial Production for December
  • Monday: Euro Area Balance of trade, Industrial Production for December

For anyone who wants further data to substantiate the position please review the attached Global Economic Update document and the Economic Dataset below.

Model Portfolios & Indices

Global stock markets continued to display high levels of volatility over the week as countries across the world battle with significant Covid-19 infection rates, mixed economic data and political uncertainty. The portfolios gained over the week as markets found support in improving earnings outlooks, strong vaccine rollout progress and increasing stimulus expectations. Looking ahead, we are optimistic on the medium-term outlook from here, accepting further volatility in the near term, but confident in our positioning, with well diversified portfolios which have been designed to weather challenging market conditions.



Important Information


Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value.  You may not get back all of your investment and the final value of your investment will depend on the performance of your portfolio.  The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations.  Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges and trading spreads.  Unless stated, income is reinvested into the portfolio.  The information contained in in this document is for information purposes only.  It does not constitute advice or a recommendation or an offer or solicitation for investment.


This Day in History


On this day in 1990, Nelson Mandela was released after 27 years imprisonment in South Africa. After his release, Mandela worked with the de Klerk government to negotiate an end to the apartheid system. Just 4 years later in 1994, Mandela was elected South Africa’s president.


Have a great week,


Jason & Gina