Market snapshot: Brexit reaction is encouraging

Buyers are in the ascendancy, guaranteeing 2021 gets off on the right foot.

The UK market’s first real opportunity to react to the Brexit deal has led to a sprightly start to the New Year.

The move builds on a rally of around 16% for the FTSE 100 since the beginning of November, although the spike was not enough to prevent an overall decline of 14.3% during 2020.

The finer implications of the UK’s exit remain to be seen, but the fact that a deal was agreed prior to the deadline removes some of the overhang which had been haunting the index for some time. By the same token, however, the news has also been a boon for sterling, which itself plays against the FTSE 100’s large exposure to overseas earning stocks.

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For the US, the buttresses of fiscal and monetary support, coupled with the continuing strength of tech stocks, resulted in an extraordinarily strong year given the backdrop.

The Dow Jones, S&P 500 and Nasdaq clocked 2020 gains of 7.2%, 16.2% and 43.6% respectively. The Nasdaq was particularly noteworthy not only due to the stratospheric rise, but the fact that the gain was in addition to a jump of 35% in the previous year.

In general terms, the increasing rollout of various Covid vaccines is another source of true optimism, even though the current situation is one of high alert, with increasingly stringent lockdown measures seen as being necessary to choke another widespread outbreak.

In the meantime, global economies will not be able to move into full recovery mode, even though investors will continue to anticipate a brighter vista on the other side of the mountain.