New Year Market Commentary 1st January 2021

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Markets closed a terrible year lower, with celebrations for the New Year all but destroyed in Europe over fears of the virus. The pandemic collapsed markets earlier in the year and the resurgence of the virus taught politicians little. Europe has been thrown back into various stages of lockdown, in order to control the virus, despite this failing the first time around. The damage being done to the European economies is intergenerational and devastating. Most major bourses remain lower for the year, with the exception of the German Dax, while the US has recovered all of the pandemic losses. The US has seen varied economic recovery, due to the nature of the individual States control of the virus and contingency measures, with Republican States generally remaining open and progressing much better.

The US election was a major event and the 6th of January 021 is promising to be a major focal point. The elections have been disputed by the Trump administration and the ‘Seating of the Electors’ by a joint sitting of Congress on the 6th, will be ‘D-Day’. There will be massive protests and fall out could impact markets. The US Dollar remains under pressure with the GBP jumping to 1.3650, while the Yen traded just above 103.00.

Trade exposed, commodity currencies have fared well, protected from the virus by geographic isolation and further assisted by the weaker reserve. The AUD closed out the year around 0.7700, while the NZD looked to regain 0.7200. These currencies are benefitting the relative freedom from the virus, with vaccines and relative normality in the economy. They remain extremely vulnerable to global disruptions and potential ‘Black Swan’ events.

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