12 February 2021
Higher expectations of US growth (and inflation) as a result of the “blue sweep” saw a step by markets in that direction a week after the Democratic senate win in Georgia with the Biden administration proposing a US$1.8tn “American Rescue Plan” which is on top of the most recent bi-partisan US$900bn stimulus agreed in December 2020. Investors should be considering stocks that are relatively inflation proof / benefit from inflation for their portfolios. The renewable energy sector is another key beneficiary though the sector has already had a material run over the past 1-2 years – we are looking to selectively add names to our approved list this year where the risk/reward makes sense.
Another noteworthy event in the US was the Wallstreetbets Reddit group where millions of retail stock traders banded together to engineer a massive short squeeze on a small group of heavily shorted stocks such as GameStop, AMC Entertainment and BlackBerry. While it was interesting to watch from the sidelines as these “meme” stocks took off vertically for a short period of time and then subsequently came crashing back down to reality in February, we are happy to stay well away.
Also during January, Europe was hit by a COVID virus variant known as B117 or the “UK variant” which is estimated to be 50% to 70% more infectious than previous COVID strains. This example is indicative of the challenge that the new COVID variants pose to the global vaccination effort and its ultimate effectiveness.