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WeekWatch -‘US stocks had their best week since February last week, as the S&P 500 Index closed at a record high’ Dec 21

WeekWatch -‘US stocks had their best week since February last week, as the S&P 500 Index closed at a record high’ Dec 21

US stocks had their best week since February last week, as the S&P 500 Index closed at a record high. The index of blue-chip US stocks rose 0.95% on Friday, bringing its weekly gain to 3.6%.

The Nasdaq Composite Index had a similarly good week, rising by 3.39%.

The US Bureau of Labor Statistics reported on Friday morning that US inflation rose by 6.8% over the last year. Markets appeared to have been expecting a number in this region, or have at least ‘priced in’ the high figure, because the data didn’t cause markets to lose their gains for the week.

Meanwhile, the spread of the Omicron variant continued to impact markets last week. On Wednesday night, the UK announced the implementation of its ‘Plan B’ restrictions in response to rising case numbers, which are effective from today. The new measures include guidance to work from home, plus mask-wearing for many indoor venues.

Markets are still weighing up emerging data on how successful current vaccines are against the new variant. There was some good news on this front last week, when the UK Health Security Agency wrote that booster shots could be up to 75% effective against symptomatic infections. Similarly, last week, data from a hospital at the centre of the outbreak in Pretoria, South Africa, suggested that the variant is causing less severe symptoms in patients than previous waves.

“Investors are increasingly optimistic that Omicron won’t prove as bad as feared,” wrote Adrian Frost at Artemis, which manages funds for St. James’s Place.

However, Frost notes that there are still risks on the horizon for investors. One of those is that the Federal Reserve’s tapering of economic support may be faster than expected, which might unsettle markets if investors perceive the central bank to be acting too fast too quickly.

In Asia last week, Chinese real estate developer Evergrande failed to make interest payments on some of its bonds – leading ratings agency Fitch to state that the company is in ‘restricted default’.

With over $300 billion in liabilities, the company’s failure to pay will have an international impact. When news first broke about the company’s issues in September, there were fears that there could be a large fallout from the event. However, fears of a 2008-style contagion from Evergrande’s difficulties have subsided since then.

Finally, last week Olaf Scholz was elected as the German Chancellor. Scholz will lead a three-way coalition between the Social Democrats, Greens and liberals. His first task will be trying to tame COVID-19, but his pledges range from modernising the country and implementing progressive social policies.

Artemis is a fund manager for St. James’s Place.

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