Deadly riots, political turmoil, and an increasingly dangerous virus did not bother global stocks, which entered the new year on new highs and look set to enjoy 2021.
Stocks rallied to historic levels as Dow Jones closed over 31000 points and the Nasdaq finished above 13000 points for the first time ever on Thursday 7 January 2021. Dow Jones rose 0.7% and the Nasdaq gained 2.6% on Thursday while the S&P 500 climbed 1.5% as stocks were unfazed by the previous day’s events, which saw a violent, pro-Trump mob storm the US Capitol building in Washington DC.
Gains continued on Friday 8 January, as investors looked optimistically towards more coronavirus stimulus spending after the Democrats won the Senate earlier this week on Wednesday, paving the way for President-elect Joe Biden’s plans and overshadowing the siege at the Capitol and the impact of Covid-19. Dow Jones, the S&P 500, and the Nasdaq were all up 0.2%, 0.6%, and 1% even as high levels of unemployment and coronavirus cases were reported in the US. Overall, Dow Jones climbed more than 1.6% for the first week of 2021 while the S&P 500 and Nasdaq were up 1.8% and 2.4%, respectively.
Tech stocks were among the best performers, as Tesla continued its monumental rally with an 8% gain on Friday, a 20% rise in just 2021, and a 743% rally in 2020. The rally has made CEO Elon Musk the richest person in the world with a wealth increase of $150 billion over the past year, and making Tesla Wall Street’s fifth-most valuable company by market cap. Salesforce rose by 1.6%, with Apple up by 1.2% as well. Bitcoin also topped $40000 for the first time, with the cryptocurrency up more than 40% just this year.
The investor confidence felt in the US travelled across the ocean
The investor confidence felt in the US travelled across the ocean. The UK’s FTSE 100 rose 6% this week, with Europe’s Stoxx 600 up almost 3% for the week, the biggest rise for both indexes since November 2020, when vaccine news was announced.
Along with the Democrat’s Senate victory, rising oil prices also contributed to the FTSE 100 uptick, with Brent crude climbing 3.3% to $56.20 a barrel, gaining 8% for the week, a four-month best. Energy companies on the FTSE 100 like BP and Shell benefitted from the higher oil prices and pulled up the whole index.
According to Dean Cheeseman, portfolio manager at Janus Henderson, the oil output reduction announced by Saudi Arabia this week will help to prevent the oil market being flooded. “That is beneficial for the UK, because the UK market is about 8% energy,” he said, as reported by the Financial Times. In the US, Chevron stock rose as well.
The UK’s post-Brexit trade deal with the EU in the last week of December 2020 has also boosted investor confidence
Saudi Arabia announced its plans to cut an extra one million barrels a day of oil in the coming months. This, along with hopes of an increase in fuel demand and travel as Covid-19 vaccines are deployed, helped stabilise oil prices. The UK has authorised Covid-19 vaccines by Pfizer-BioNTech, Oxford-Astrazeneca, and Moderna, and has initiated a mass-vaccination campaign. Around 1.5 million people have received vaccines in the UK, with the government intending to vaccinate all top priority groups by next month. The UK has now exceeded three million cases and 80,000 fatalities it continues to battle a new strain of coronavirus.
6.7 million people in the US have also received vaccines, with Covid-19 continuing to ravage the country as 140,000 job losses were reported in December. President-elect Biden on Friday as such proposed “trillions of dollars” of economic aid, including greater stimulus checks. Catherine Doyle, investment specialist at Newton Investment Management, said the Senate victory and expectations for more stimulus payments were “what’s dominating markets”. Should there not be any obstacles to vaccine deployment or another new strain of the coronavirus, “it feels like we’re now really on track for a fairly consistent and steady recovery”, she added.
The UK’s post-Brexit trade deal with the EU in the last week of December 2020 has also boosted investor confidence, ending long drawn-out political uncertainty and leading to what may be a positive year for UK stocks. “If we go back to the referendum vote, investors have been underweight in the UK due to the uncertainty,” said Mr Cheeseman. “Now the trade deal is done and dusted, that’s one more uncertainty crossed off.”