Market Update

As evident from the provided table, global equity markets remained relatively stable throughout the week. However, it's worth reflecting on the significant events that occurred around this time last year. At that point, the coronavirus, initially confined to Wuhan, began its rapid global spread. Almost overnight, the world transformed as stringent lockdowns were enforced worldwide to curb the virus, resulting in a sharp decline in equity markets globally. For instance, the FTSE-100, which stood at 7,457.02 on February 19, 2020, plummeted to just below 5,000, marking a drastic 35% fall.
Despite the challenges, we consistently emphasized the importance of resisting knee-jerk reactions and maintaining a long-term perspective, considering the pandemic's transient nature. However, we acknowledge this was easier said than done for our clients. Fast forward to today, and global equity markets have thankfully started to recover. As of Friday, February 19, 2021, the FTSE-100 closed at 6,624.02, representing a 11.17% decrease from the same time last year.
During this past week, we closely examined crucial data releases from the US, especially in light of recent discussions about potential inflation and interest rate hikes, along with debates about the necessity of Joe Biden's proposed $1.9 trillion fiscal stimulus—a stance we've consistently challenged.
The data brought a mixed bag: US retail sales exceeded expectations, surging by an impressive 5.3% in January, well above the 1.1% anticipated by major economists. Additionally, US industrial production, encompassing output from factories, mines, and utilities, grew by 0.9%, nearing pre-coronavirus levels.
However, the need for low interest rates and additional fiscal stimulus was underscored by the US weekly jobless claims data. Initial claims for unemployment benefits surpassed economists' expectations by nearly 90,000, and these figures were higher than the previous week's reading, which was itself revised upwards by 55,000, indicating a concerning trend.
It's crucial to note that the US central bank maintains a dual mandate of managing inflation and ensuring maximum employment. Consequently, we don't anticipate imminent changes in interest rates. While headline inflation may rise due to factors such as distorted oil prices and temporary spikes in food prices due to weather-related crop losses, underlying inflation pressures remain modest. This situation is likely to persist as long as US unemployment remains high.
Fortunately, our views align with those of Eric Rosengren, the President of the Federal Reserve Bank of Boston, who dismissed inflation concerns this week, expressing his belief that a sustained above-target 2% inflation rate is not imminent.
Looking ahead to the coming week, we anticipate significant events such as UK employment data, including the unemployment rate and weekly earnings, US jobless claims, the Chicago Fed National Activity Index, US durable goods orders, the Fed's preferred inflation measure (the PCE), and Japanese industrial production, all of which will be closely monitored for their potential impact on the global markets.