SNAPSHOT2 min read

Market update – February 2021

A summary of our current economic and market views.



Charities Team

Investors gripped by “short squeeze” drama 

Global equity markets fell slightly in January, but it is not the major indices that have been making headlines in recent weeks. Unusually, it is the incredible volatility in a handful of US stocks, most notably video game retailer GameStop, that has been distracting investors from the ongoing pandemic. These violent moves, mostly in stocks with a high level of short interest, have caused significant losses for some prominent hedge funds. This could still have spill-over effects in other parts of the market. If nothing else, the episode is a reminder that volatility can arise from very unexpected sources – and with little warning.

Vaccines become a source of tension

Vaccines are being deployed far faster in some countries than others. The latest figures suggest almost 14% of the UK’s population has received at least one dose of a vaccine – compared to 9% in the US and 3% in the largest countries in the Eurozone. If sustained, the disparity could have an impact on the relative economic performance of each region. Differing vaccination rates, which in part reflect supply constraints, are also proving a source of international tension. The standoff between the UK and the EU over the export of Pfizer’s vaccine from Belgium is unlikely to be the last international dispute.

Fiscal spending remains in focus

President Biden continues to push a $1.9 trillion stimulus package, which would involve $1,400 payments to individuals. Following their success in the Georgia Senate race, the Democrats should be able to secure Congressional approval. However, their very slim majority in the Senate means this may require further negotiation and delays. In the UK, the government’s focus is shifting to longer-term economic recovery plans. It is expected that next month’s Budget will include some new spending commitments to support growth.

Portfolio positioning

We expect that gradual economic recovery, combined with ongoing stimulus measures, will continue to support global equity markets. In recent months, we have increased our exposure to more cyclical areas of the market slightly. Despite improved performance over the last few months, there remains a large performance gap between industries most affected by lockdowns and those which have benefited. The Democrats’ success in the US election is likely to result in further fiscal stimulus, which should also help the cyclical recovery. However, given the continued uncertainty caused by coronavirus, we are maintaining our holdings in more defensive assets – such as gold, government bonds and cash. We also maintain our conviction in long-term structural themes such as technology, healthcare and global infrastructure.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Charities Team


Market views

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.