UK Capital Market Assumptions and Summary: January 2021
Jan 26, 2021 9:30:00 AM
Each quarter, we use our market-proven global stochastic asset model to generate a range of capital market assumptions based on the latest market data. Below we provide a brief market summary. A download link to the full report is also provided.
Market Summary: Quarter 4 2020
The final quarter of 2020 saw a return of bullish risk sentiment across financial markets globally, with some equity market benchmarks hitting record highs, spreads across global credit markets approaching record lows, and commodities returns improved against a weakening US dollar.
The US election result, positive news around global vaccination rollouts, and a resolution to the UK’s withdrawal agreement from the European Union contributed to investors’ increased risk appetite. Bringing to a close what can only be described as an extraordinary year for financial markets and the rest of the world.
Against this backdrop, here are some Q4 highlights from around the global financial markets;
Global equities continued to make gains following the positive news of vaccine rollouts and global economic recovery prospects;
US equities benefitted from the US election result, positively absorbing the news that Biden will become the 46th US president. The announcement the US Federal Reserve would add an additional $900 billion in stimulus also buoyed markets;
European equities rallied towards the ends of the year boosted by news of the vaccine rollouts;
UK equities performed well during the period, boosted by the resolution of the Brexit withdrawal agreement and the rollout of multiple vaccines;
Emerging and Asian markets performed well because they have, to a significant extent, passed some of the challenges currently facing western economies around COVID-19;
Government bonds performance was mixed across regions. The US-10 year treasury yield rose (which means prices fell) to finish the quarter higher, while in Europe, major government yields fell, as the European Central Bank increased the amount of quantitative easing. UK 10-year Gilt yields remained broadly unchanged due to uncertainties around Brexit, vaccines rollout, and ongoing lockdown;
Corporate bonds outperformed government bonds, with both investment grade and high yield delivering strong positive total returns as investor risk appetite increased;
Commodities benefitted from positive vaccine news that provided hope of a 2021 global economic recovery and the weakening of the US dollar.
To read more about financial markets, the global economy and outlook for assets, please download the full report.
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