Imperium Capital Publication

Global Matters Weekly – 22 February 2021

Coin toss

by Andrew Hardy, CFA

Digital gold or “index for money laundering1 ”? Fiat currency hedge or irrational mania? Bitcoin divides opinion more than most, but the bulls are in the ascendency at present and the 12-year old cryptocurrency is gathering many new followers as a result. Its 6-fold increase in price in the last year has been the driver; creating a FOMO (fear of missing out) effect whilst also increasing the size of its market, which reached $1 trillion over the weekend, to a level where institutions begin to consider it more seriously. While we expect that cryptocurrencies will become more mainstream over the coming years, we’ve never held Bitcoin in portfolios, nor do we have any plans to include it. I’ll provide a few thoughts around this here.

Market Snapshot

  • Global equities returned -0.4% last week whilst global bond yields rise.
  • The Pfizer-BioNtech vaccine is reported to be 89.4% effective in preventing Covid-19 infections according to an Israeli study.
  • Brent crude oil rose 0.8% to $62.9 a barrel.
  • Gold fell -2.2% to $1784.3 per ounce.

Viewpoint – January 2021

The surge in markets in late 2020, triggered by the positive vaccine news, Biden’s success in the US election and the favourable settling of the UK-EU trade negotiations, continued into the new year. Equity markets made a strong start while government bond yields rose. However, optimism waned as January wore on, concerns rising about Covid mutations, the pace of vaccine roll-out, especially in the EU, and the economic damage caused by tightened and extended lockdowns across many parts of the world, most notably Europe. By month end, expectations for a sharp economic recovery had been pushed out to later in 2021. Sentiment was also impacted by the bizarre antics of retail traders in the US driving heavily shorted stocks to nonsensical heights in an attempt to inflict damage on hedge funds, an investment tactic that could only lead to misery for many of those involved.

Global Matters Weekly – 15 February 2021

More of the Same

by Richard Stutley, CFA

Quote: “just right, then, is a continuation of current policy and hence central bankers need to hold their nerve in the face of rising inflation and provide more of the same”

The tale of Goldilocks and the Three Bears was a popular analogy in markets in the years post the Great Financial Crisis, used to describe the global economy as not too hot, not too cold, but just right. Extending the idea to today’s central bank policy: too hot would be embarking on helicopter money or large scale debt forgiveness; too cold would be abandoning tools like quantitative easing, possibly in response to criticism of QE’s role in fuelling asset price bubbles; just right, then, is a continuation of current policy and hence central bankers need to hold their nerve in the face of rising inflation and provide more of the same.

Market Snapshot

  • Global equities rose 1.7% last week
  • The US Senate acquitted former President Trump of incitement to insurrection
  • Brent crude rose 5.2% last week to $62.4 a barrel
  • Gold rose 0.6% to $1824.23 per ounce

Global Matters Weekly – 8 February 2021

To the moon – YOLO

by Lorenzo La Posta, CFA

Tuesday 26th January, it’s early morning here in the UK and still night in the US when Aurelio, a friend of mine, texts me.

Aurelio: “Dude, what is going on with Game Stop? Last week some people on Reddit said they were gonna shoot GME (ticker for Game Stop) to the moon, to $1000 per share! So, I bought a few at $45 on Friday…”

I had not heard anything about Game Stop, so I start by checking the share price: it closed at $77 yesterday, +285% in the past two weeks! Ok, something’s off. I spend a few minutes on r\ wallstreetbets to get a grasp of what apparently is suddenly becoming a coordinated action in one of the largest online communities. I see people yelling stuff like “Let’s get GME to the moon!”, “We own you, hedge funds!”, “HOLD TILL $1000 – AT LEAST” and loads of “YOLO” (i.e. you only live once). Some people are even posting screenshots of their six digit $-gains made over just a few days. I can get back to Aurelio now. He’s no investment expert, yet he’s smart enough to understand what’s going on.

Market Snapshot

  • Global equities rose +4.2% last week
  • Concern mounts after limited trials show the Oxford/AstraZeneca vaccine doesn’t protect against mild/moderate illness from the South African mutation
  • Brent crude oil rose +6.2% to $59.3 a barrel
  • Gold fell -1.8% to $1847.1 per ounce

Global Matters Weekly – 1 February 2021

Emerging Opportunities

by Stephen Nguyen, CFA
2020 witnessed some of the toughest challenges – be it social, economic or political – that most of us have ever experienced. Around this time 12 months ago, the Covid-19 pandemic was gathering momentum, particularly in Asia before it spread further afield, and soon enough the world went into lockdown. As we slowly emerge from the shadow of the pandemic thanks to vaccine breakthroughs, mobility and global economic growth should gradually increase. Emerging markets (EM), led by the Asian powerhouses (primarily China, South Korea and Taiwan), are likely to lead the recovery helped both by them being the engine of global growth but also having managed the pandemic better than peers. Emerging markets outperformed global developed equities in 2020 for the first time in three years: could this be a sign of things to come?

Market Snapshot

  • Global equities fell -3.4% last week
  • The IMF revised their global growth forecast for 2021 from 5.2% to 5.5%
  • Brent crude rose 0.8% last week to $55.9 a barrel
  • Gold fell -0.4% to $1847.65 per ounce