fbpx
Title Image

WeekWatch – ‘US stocks reached new highs at the end of the four-day trading week’ April 2021

WeekWatch – ‘US stocks reached new highs at the end of the four-day trading week’ April 2021

US stocks reached new highs at the end of the four-day trading week, with technology stocks enjoying a resurgence.

They were also supported by an announcement from President Joe Biden, who unveiled a $2 trillion infrastructure plan last week. Although broad-ranging in its scope, the plan focuses on things such as broadband, scientific research, and electric vehicles, which are expected to be a boost for the technology sector.

Meanwhile, the yield on the benchmark 10-year US Treasury note fell towards the end of the week. This number, which has been rising steadily so far this year, has a knock-on effect on the prices of lots of financial assets. Its increase so far in 2021 appears to have been weighing on the values of some technology stocks. So, last week’s decrease was positive for many technology shares.

Even so, many investors are expecting it to continue rising this year, in what may be a sign of a more muted outlook for the fast-growing technology companies that have generated such strong returns in the recent past. This is arguably a good thing considering the high levels of speculative excitement that have characterised the investing landscape in the recent past.

“The FOMO market is over; it’s a more broad-based opportunity set now and a more ‘normal’ investing environment. Investors will be able to bide their time, waiting for openings,” suggested Johanna Kyrklund, Group Chief Investment Officer at Schroders and manager of the St. James’s Place Managed Growth fund.

The ‘fear of missing out’ (or ‘FOMO’) explains the psychology behind the wild price movements in some stocks that are popular among amateur online traders. It was a feature of the GameStop saga in January and February this year – which saw the share price of a struggling US gaming retailer shoot upwards as investors piled into its shares in expectation of a rapid rise. Some of them were right, but others were left with losses when the share price subsequently declined.

With an economic recovery on the horizon, it’s possible that markets are entering a calmer phase, suggested Kyrklund.

“In today’s markets a more boring approach – favouring diversification and judiciousness over more racy assets – may be what’s required,” she added.

One of the biggest stories last week in financial markets was the implosion of Archegos Capital Management – an investment house whose higher-risk strategies involved borrowing large sums to buy financial instruments related to publicly-traded companies.

The news has already impacted other financial services businesses, with several investment banks reporting expected losses, or declines in their share prices. There were fears that the news could lead to wider disruption in the market, but so far most of the fallout appears to be limited to companies that had dealings with Archegos.

“There is no need to be concerned that this will lead to broader contagion. In fact, in discussions with policymakers over recent days, there is a thought that this may serve to tighten up regulation and risk management practices in areas of weakness,” wrote Mark Dowding of BlueBay Asset Management, co-manager of the St. James’s Place Strategic Income fund.

While the broader fallout might be limited on this occasion, that doesn’t mean there are no lessons for investors, he added.

“As Archegos reminds us, greed can often end in tears and investing should not be confused with the pursuit of chasing short-term speculative gains,” added Dowding.

Even though the longer-term picture is bright, in the near term there was news last week that showed COVID-19 is still a disruptive force. In particular, several European countries have re-enacted lockdown measures in order to curb the spread of a new wave of cases.

France’s President Macron announced a four-week national lockdown on Wednesday last week. Similarly, Italian lockdown measures will continue to the end of April. Due to restrictions, Pope Francis gave his Easter message inside St. Peter’s Basilica to a small gathering, rather than to large crowds in the square outside.

BlueBay and Schroders are fund managers for St. James’s Place.

FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

© S&P Dow Jones LLC 2020; all rights reserved

The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.

Members of the St. James’s Place Partnership in the UK represent St. James’s Place Wealth Management plc, which is authorised and regulated by the Financial Conduct Authority.

St. James’s Place Wealth Management plc Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom.  Registered in England Number 4113955.

 

Proud to be supports of...

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

88/89 Whiting Street
Bury St Edmunds
Suffolk, IP33 1NX
01284 703422
[email protected]

Registered in England and Wales
Company No.06803554

SJP approved as at 18/10/2023

The Partner Practice is an Appointed Representative of and represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products. The ‘St. James's Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James's Place representatives.