Sleepy Markets in January 2021

The first month of 2021 was a bit of a lull with respects to the markets. Essentially flat, the TSX was down -0.55% and the S&P 500 around -1.11%. All in all it was a quiet month for investors until the end of the month when a group of retail investors using social media, and the discount trading platform Robinhood, took on some of the biggest Wall Street hedge fund managers and won. In a coordinated effort they drove up the share price of stocks like GameStop, Black Berry, AMC and Nokia forcing a handful of hedge fund managers to cover their short positions and losing billions in the process. The whole encounter was fast and furious and created quite the stir making headline news across the globe.

 

Meanwhile, economists have begun to weigh in almost unilaterally regarding the potential risk of inflation. It’s understandable with the money supply at record levels (up 25% year over year), excess savings approaching 10% of spending, an increase in home values (rising household wealth), and commodity prices up 13% over the past year (32% spike in metals). All things considered, there is a concern that if savings are unleashed too fast and we see a surge in demand, combined with lingering supply-chain constraints, these forces could feed the proverbial inflationary beast in a way we haven’t seen in decades. To be fair economists have been warning about this for over a decade now, and have been wrong, yet we think the concern is valid and will continue to monitor the signs and make decisions accordingly.

 

If you would like to read more of our market commentary for January 2021, please contact us.

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