It has been a highly eventful start to the year in the world of investing. From GameStop to Bitcoin, investing has been in the news consistently for the past few weeks. But with many investments beginning to take a turn for the worse, what’s currently driving the markets?
A Return to Normality – but U.S Equities Overvalued?
Policy support and post-COVID-19 growth expectations have driven equity markets for months. As routes out of lockdown are plotted by governments, the next recovery phase will see impressive GDP numbers. However, GDP growth expectations have been steep, which may cause disappointment in the short term. Couple this with stocks in the U.S being well above value in terms of their long-term average and there could be some volatility in markets, particularly in the short term.
Rising Pound Weighs on Returns
As many investments are spread across the globe to aid diversification, the recent rising value of the pound had had an impact on investment values. This can often have the double effect when global investments fall and the pound rises. Of course, this has been a positive for more domestic investments, and in particular those companies that are paid in pounds rather than dollars. But having global diversification is vital for mitigating risk.
GameStop & Bitcoin, Volatility Abound
As I’m sure you’ve seen in the news towards the end of January, amateur investors battled with Wall Street giants, with the saga continuing to this week when GameStop’s shares surged once again. In short, major hedge funds had bet billions of dollars that GameStop’s shares would fall. But they have faced major losses after amateurs, swapping tips on social media sites like Reddit, drove up the share price by more than 700% in one week. This led to increased volatility in the markets and continues to do so. Another asset that is garnering much interest is Bitcoin. The only comment that will be made here is that both these events show just how fluid the current investment world is.
Conclusion
Remain diversified and take a long-term view! We will continue to monitor our clients’ portfolios on a regular basis. If you have any questions, please do contact us either by telephone (01258 857101) or by email (ian@greenfields.biz).
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