Equity and bond market performance diverged further, given mounting expectations that stimulus-fuelled demand could spill over into higher inflation. The week ahead will bring fresh sentiment surveys, as well as inflation and GDP data from the US and other major economies.
In 2020, the boom in financial markets contrasted with the disastrous economic effects of Covid-19. The market narrative played ‘catch up’ with the market action, attempting to justify soaring valuations.
Equity and commodity markets maintained their rising trend. Japanese indices touched levels not seen for 30 years, although the emerging markets were the clear outperformers. This week Q4 earnings reporting is set to continue, while flash PMI data from across the globe should indicate the strength of improving sentiment.
It’s been called ‘the year to forget’, but there is no denying that 2020 has been a memorable year. Markets hit new peaks in February, before the Covid-19 pandemic struck home and caused a spike in financial market volatility. Since then, with huge rescue packages in place and abundant liquidity, many markets recovered their nerve. Boosted further by the prospect of a reflationary new US president and an effective vaccine against Covid-19, new highs have been reached.