Weekly Market Insight

Latest Economic & Market Update 24th February 2021

24th February 2021

Good afternoon, it is February 24th 2021 and here is your economic and market update from BlackBee. 

Today’s focus:

  • Powell: “hope for a return to more normal conditions this year”.
  • Global bond market suffering worst start to a year since 2015.

Addressing the Senate Banking Committee on Tuesday night, the Chairman of the Federal Reserve Jerome Powell said there was “hope for a return to more normal conditions” this year but signalled that the Central Bank intended to maintain its heavy support of the economy. Even with a brighter economic outlook his comments did not point to any early Fed tightening of monetary policy or drawdown of asset purchases. The central banks ultra-easy stance was justified according to Powell as despite a more optimistic assessment he stressed that there were still big downside risks to the recovery. Powell said that “while we should not underestimate the challenges we currently face, developments point to an improved outlook for later this year”. The prospect for an improved Covid-19 situation in the US in combination with the new large scale fiscal stimulus has led to economists upgrading their growth forecasts for 2021. Powell also downplayed the inflation concerns saying inflation dynamics did “not change on a dime” and the jump in prices was unlikely to be sustained. Powell highlighted the most worrying aspect of the US economy to be the unused capacity in the labour market with nearly 10m fewer Americans employed in comparison to the same time last year. (Source: FT).

As investors have been growing in confidence that the rollout of Covid-19 vaccines will boost economic growth and inflationary pressures, the global bond market is suffering its worst start to a year since 2015. In terms of total return terms (accounting for price changes and interest payments), the Bloomberg Barclays Multiverse Index which tracks $70tn worth of debt has lost 1.9% since the end of last year. If this performance is sustained it would be the sharpest first-quarter setback since 2015 for the index and the worst quarterly performance since 2018. Longer term US treasuries have lost over 9% on a total return basis this year according to a Bloomberg Barclays Index of US Government bonds. The sell off in bonds resulting in higher yields has started to stir concern over the equity market rally. (Source: FT).

Best & Worst Performers of Large Cap US Stocks on Tuesday
Click image to enlarge

Global Market Update
(as at close of markets 23/02/2021)