OCM Commentaries

Market Commentary 6th January 2021

By January 6, 2021 No Comments

A Fresh Start: Our 2021 Outlook

After a turbulent 2020, we enter the New Year with optimism over what the global economy has in store for investors for the year ahead. It is no secret that markets have been looking forward to the economic recovery expected to take place over the year, with European markets kicking off 2021 with strong gains in the first few trading days of the year owing to vaccine optimism and abating political risks.

Towards the end of 2020, investors grappled with considerable uncertainty related to the continuing coronavirus pandemic as well as key political events: the US Presidential Election and Britain’s long-awaited exit from the European Union. Both events added volatility to trading conditions in the final months of the year, however after court rulings quashed the remaining US election drama and a last-minute trade deal was made before the end of the year, we enter the new year with a considerably clearer outlook which continues to brighten despite remaining short term risks.

Our update on Brexit and the UK Outlook can be found in the Market Update document attached.

Across the industry, there is widespread agreement that we may experience a rocky start to the year in markets as countries including the UK experience a fresh wave in coronavirus cases which has led to a re-tightening of restrictions in movement and economic activity. That being said, once the distribution of vaccines is well underway, economists are expecting to see strong recoveries in activity and spending, with data suggesting that consumers are well positioned to resume spending after de-leveraging during the second half of 2020.

As such, the true economic benefits are unlikely to become clear in the fundamental data until the second half of the year, and these benefits will be driven by pent up demand and consumer spending. As markets tend to be more forward looking in nature, we expect to see a continuation of the positive momentum observed in recent months, spurred on by accommodative central bank and government policy prior to the confirmation of a recovery which is expected to follow in the second half of the year.

We expect early cycle dynamics to gain momentum as we progress through 2021, benefitting small caps and value areas of the market in particular, with the rotation from growth to value stocks set to accelerate over the year as 2020’s unloved names become more attractive. China and the US are expected to remain important drivers of growth, and we expect to see a transition back to services from goods during the year. That being said, US exposure should be chosen carefully given elevated valuations and the dominance of growth names in 2020, while sterling investors will also consider the impact of continued dollar weakness in allocation decisions.

After a challenging year in 2020 as political uncertainty weighed on the market recovery, the UK stands to gain considerably from a strong vaccine rollout considering its discounted valuations, but the potential for growth in the short term will be dependent on Covid and Brexit implications unfolding. Similarly, Europe is well placed to benefit from a recovery in activity given current valuations and supportive market conditions. Emerging markets remain attractive, and with the dollar weakness expected to continue, we expect to see this area benefitting over 2021.

Our Positioning

After experiencing strong performance over 2020, we are optimistic on 2021 returns and we are well positioned to benefit from an acceleration in key trends and rotations observed over 2020. It remains our view that at the transitional stages of the cycle we are able to add the most value to our client portfolios through active management and strong fund selection, while maintaining a high level of diversification to mitigate short term risks.

Looking ahead over the year, although it is clear that volatility remains in the short-term (as observed in today’s market movements), we remain optimistic and continue to see opportunities arising over the year as the outlook brightens.

Key Events We Are Watching This Week:

  • Thursday: Eurozone PMIs, US Non-Manufacturing data for December
  • Friday: US Non-Farms Payrolls for December


Model Portfolios & Indices

Global stock markets continued to display high levels of volatility over the week as countries across the world battle with surging virus cases and political uncertainty. The portfolios gained over the week as markets rallied on positive vaccine developments despite the threat of renewed lockdown restrictions. 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 2001, the US Congress certified George W. Bush as the winner of the 2000 Presidential Election following a legal battle. The ruling came more than five weeks after balloting ended.


Have a great week,


Jason & Gina