Markets were broadly positive last week with the MSCI All Country World Index (ACWI) of global stocks up +1.0%, giving a return of +3.2% for the year to date.  In a slight reversal of the trend which started in Q4 last year, we witnessed expensive markets such as the US and China outpace cheaper markets in the UK and Europe.

Beyond the rather sedate market-level movements, the week saw the continuation of some truly bizarre single stock activity.  Shares in video game retailer GameStop surged +80% on Friday, as amateur traders coordinating on the online message board Reddit used stock options to trigger a “short squeeze” in the stock.  This caused the market capitalisation of GameStop to rise from $1.3bn at the end of 2020 to $4bn.  GameStop is lossmaking, reporting a -31% drop in sales in December 2020 and is a brick-and-mortar retailer which is facing digital disruption.

In the US, equity options’ trading volume on retail platforms such as Robinhood has exploded recently as punters funnel their stimulus cheques into highly speculative bets.  This has been concentrated in a handful of names such as the FAANG stocks, Tesla and a series of other tech and biotech names.

Another market that continues on a wild ride is of course Bitcoin and the wider cryptocurrency market.  Bitcoin rose 4x vs the US Dollar between October last year and January 2021, before falling -22%.  For an asset which is touted as a replacement currency, we struggle to understand how something so volatile and speculative serves as a store of value or medium of exchange.  While it has been interesting to witness some multi-asset investors adding Bitcoin to their holdings in the last year,  Beaufort Investment is not in the business of adding things it does not understand to our client’s portfolios.

These developments continue to give the Investment team cause for a certain degree of caution that speculative excesses are building in certain areas of markets.  Conversely to this, it is likely that fantastic opportunities for future returns reside in the more unloved and unglamorous areas of markets.  Now is the time to employ significant selectivity and nuance to one’s investment approach.

Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.

The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.

All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete.  Unless otherwise specified all information is produced as of 25^th January 2021. © 2021 Beaufort Investment. All rights reserved.