Summary

• Equity markets continue to be supported by easing monetary policy.
• The FTSE All-World Index declined 0.4% in January, while the Global Leaders Portfolio fell 1.3%
• January saw the US Democratic Party taking control of the senate paving the way for fiscal stimulus measures.

The FTSE All-World Index declined 0.4% in January, while the Global Leaders Portfolio fell 1.4%. The month began with the Democratic party taking control of the Senate at the Georgia elections. This should pave the way for President Biden to enact fiscal stimulus measures. Meanwhile the equity market continues to be driven by easy monetary policy. There are signs of excessive optimism in some areas of the market. Social media induced a retail bear squeeze on institutional short sellers of a number of stocks, most notably GameStop and AMC.

The top performing holdings during the month were BP (up 15.7%), Alibaba (up 9.1%) and Alphabet (up 4.8). While the top detractors were Visa (-11.7%), Kering (-9.1%) and Adobe (-8.3%).

Following the recent share price rally, the position in BP was sold and a new holding established in Lloyds Banking Group. Lloyds is a high-quality UK domestically focused retail bank trading on depressed multiples. All UK banks were forced to suspend dividends by their regulator during the pandemic. This resulted in forced selling of the stock by some institutions. This ought to be reversed in the next few months given the bank’s capital strength. Agreements reached with the EU in December should have removed much uncertainty that surrounded the UK economy. The biggest unknown factor globally on future growth remains the ability to recover from the pandemic. The relative speed of the roll out of COVID-19 vaccines in the UK implies to us of a faster, than generally anticipated recovery in the country.

The speed and efficacy of vaccine roll outs are the biggest swing factor to forecasts of the global economy. Early data from Israel and the UK suggest that vaccination programs are having the desired impacts. As economies recover supportive measures will begin to be removed by central banks and governments. All seem mindful to do this in a measured and gradual way. While our own measures of value are conducted over long time horizons, we are conscious of the huge impact these supportive measures have had on equity prices. We do not anticipate substantial change on this front in the near term. This makes us continue to see upside to global equity markets generally – though there seem obvious speculative areas to avoid.