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Commentary on financial markets – January 2021

  • USA: Senate won by Democrats
  • vaccination against COVID-19


Stock prices also rose in December, despite posting extreme gains in November. Thus, there was no price correction. Highlights The first month of the year was mixed in the stock markets. Some developed markets posted moderate gains, while others posted moderate losses. Gold weakened and oil continued its strong uptrend.

The elections for the US Senate in the state of Georgia took place at the beginning of January. The last two seats were taken by the Democrats. The total Senate is exactly 50 seats for the Democrats and 50 seats for the Republicans. The Democratic Vice-President’s vote will thus be decisive. This allows the new US President Joe Biden to fully pursue his political objectives. At the beginning of January, Biden already announced a new stimulus package – the ‘American bailout plan’ – amounting to USD 1.9 trillion, which is intended to build on Trump’s fiscal injection of USD 900 billion. The proposal includes $415 billion in aid aimed at fighting covid-19, around $1 trillion in direct relief for households and $440 billion for small businesses and communities hard hit by the pandemic. Logically, Biden found support in Janet Yellen. In her opening hearing as Treasury Secretary, she urged lawmakers in Congress to support further stimulus to revive the economy. According to the former US Federal Reserve chairwoman, the benefits of a large stimulus package to fight the coronavirus pandemic outweigh the costs of a higher debt burden on the country.

A major factor negatively impacting markets in early 2021 is a slower-than-expected vaccination rate for COVID-19. Vaccination is already underway, but at a significantly slower pace. In the US, for example, 2.8 million people were vaccinated during December, but initial estimates were for 20 million by the end of 2020. In the UK, around one million people have received the vaccine, but in Germany only tens of thousands have received it. Slower distribution of the vaccine may mean longer lockdowns and therefore a more significant slowdown in economic activity. Therefore, in recent days, EU countries have been further tightening social distancing measures in view of the high daily increases in the disease.

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