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Volatility Rules

The month of January was a friendly reminder that some of our fears are not yet over and that there is still a long way to go before the pandemic and other micro/macro imbalances are defeated. The current year 2021 began quite explosively on the political front with a pro-Trump mob storming and vandalizing the Capitol building on January 6. Surprisingly, and despite the outrageous attack on the very heart of US democracy and sovereignty, equity markets did not see this act as a pretext to correct from record-high levels. The S&P500, against all odds, defied gravity and closed that trading session—and the following—in green numbers. This fact bolstered investors’ perceptions that equity markets would reach perpetual uptrend motion1 , further substantiated by a supportive risk-on stance environment: market’s positive reading of the US elections, an ultra-lax monetary policy for the foreseeable future, low-lying yields, better-than-expected corporate earnings resiliency, recovery of the macroeconomic variables, inflation expectations slowly but surely poking out from under, and finally, the timely rollout of vaccines.

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