Market Update January 2021

Global equity markets ended the month broadly flat in January as vaccine distributions lagged target levels and significant market volatility occurred towards the end of the month.

The value of the Australian Dollar broadly decreased against major currencies, enhancing the returns of overseas investments when measured in Australian dollar terms. Global investment grade credit spreads expanded over the month slightly (i.e. the market’s perceived risk of lending to high quality companies increased).

The United States saw a turbulent month in January from a political perspective. On 5 January, the state of Georgia voted in their two run-off Senate races, with the Democrats winning both seats. This completed the “sweep” for the Democrats who now hold the House, Senate and the Presidency for the first time since 2010. The Democrats hold the slimmest possible margin in the Senate, holding 50 seats out of 100 (if both Independents side with the Democrats) and with the Democrat vice-president casting any tie-breaking votes. 

On 6 January, the United States Capitol Building (where Congress resides) was occupied by citizens protesting the election outcome. This was the first time in over 200 years that the Capitol had been breached. Former-president Trump was still in office at the time and was impeached for a second time (the only president to be impeached more than once) on 13 January for “incitement of insurrection”. The trial for the former president’s impeachment will take place in February and is unlikely to result in a conviction in the Senate given continued Republican support.

One week later, on 20 January, President Biden and Vice-President Harris were sworn in. On the first full day of his presidency Biden signed 17 executive orders that dismantled some of the Trump-era regulations and put in place policy to increase the nation’s response to COVID-19. Notable executive orders include the United States rejoining the Paris Agreement on climate change and rejoining the World Health Organisation.  

German Chancellor for the past 15 years, Angela Merkel, announced she would be stepping down, and her party, the Christian Democratic Union (CDU), held an election to replace her in January. The election was won narrowly by Merkel’s preferred candidate, Armin Laschet. 

On 26 January, the Italian Prime Minister Giuseppe Conte resigned. Conte will remain Prime Minister in a caretaker capacity. The move to resign is seen as a tactical move to garner more support for a majority government in the next election.


Reported global coronavirus case numbers exceeded 103 million at the end of January 2021, with a total of over 2.2 million fatalities [1]. Reported cases of daily new infections climbed to a peak on 8 January and surpassed 845,000 per day on a global basis, before tapering off somewhat by the end of the month. Global daily fatality rates climbed steadily throughout January, peaking at 17,500 on 20 January. The United States, Brazil, United Kingdom, Spain, Columbia, Mexico and South Africa in particular saw infections increase to record levels in January. 

Different strains of COVID-19 (named B.1.1.7, 501Y.V2 and P.1) were detected as far back as September 2020 and have affected the United Kingdom, South Africa and Brazil respectively throughout the month of January. These new strains of COVID-19 are being studied closely. At this stage preliminary research suggests the new strains of COVID-19 are up to 70% more infectious but are not associated with a higher mortality rate. While vaccine producers suggest that the current vaccines will be successful in combating the new strains of COVID-19, more research is necessary before any firm conclusions can be drawn.

Australia saw zero deaths due to COVID-19 during January. New daily cases of infection tapered off steadily throughout the month to be at low double digit or single digit numbers. From 22 January Australia imposed a border restriction requiring anyone travelling to or transiting through Australia to provide evidence of a negative COVID-19 (PCR) test to the airline, taken 72 hours or less before the scheduled departure, and that masks must be worn on all international flights, including at airports. On 25 January, the Therapeutic Goods Administration (TGA) provisionally approved the Pfizer/BioNTech vaccine for use in Australia.


Major foreign equity markets produced mixed results throughout January. Developed markets (excluding Australia) returned -0.8% on a currency-hedged basis (and -0.4% in Australian dollar terms), underperforming emerging markets which returned 3.8% in local currency terms. Of the major markets, the best performer (for the second consecutive month) was Japan (Nikkei 225 Index) which returned 0.8% for the month.

The Australian stock market (ASX 200 Index) generated a return of 0.3% during January, with 6 out of 11 sectors contributing positive returns. Consumer Discretionary and Communication Services were the two top performers returning 4.7% and 2.7% respectively. Real Estate and Industrials were the worst performing sectors returning -4.4% and -3.0% respectively.

In contrast to the Australian stock market, only 2 sectors in foreign developed markets produced positive returns. Energy and Health Care were the top performing sectors returning 3.0% and 1.3% respectively. The sectors that performed the worst were Consumer Staples, Industrials and Financials which returned -4.0%, -2.4% and -1.3% respectively.


The Australian government bond yield curve continued to steepen throughout January with the two-year yield increasing by 0.032% and the ten-year yield increasing further by 0.16%. The cash rate set by the RBA remained unchanged at 0.1% throughout January.

Major developed global government bond yields produced mixed results over the two-year term. However, all ten-year term yields increased, with the United States government bond yield increasing the most by 0.15%. Of the major two-year sovereign bonds, those of the United Kingdom increased the most by 0.054%.


The Australian dollar weakened against all major currencies due to a reduced appetite for risk (risk-off sentiment), with the exception of the Japanese Yen against which the Australian currency rose 0.7% over the month of January. The AUD decreased by 2.1%, 0.9% and 0.6% against the Chinese Renminbi, British Pound and the United States Dollar respectively.

The Australian Dollar finished the month at 0.7622 US Dollars, down 0.7 US cents over the month. 


WTI oil rose 7.6% and the price of Brent crude oil increased 7.9% over the month due to increased global demand forecasts and reduced supply in Iraq. The S&P GSCI Industrial Metals index increased 5.3% on average, with iron ore being the strongest performer, rising 9.7%. Regarding precious metals, the price of gold decreased 2.7% and the price of silver increased by 2.2% for the month of January. 

Performance of key markets to 31 January 2021

Asset class Index Month* (% change) FYTD* (% change) 1 year* (% change)
Australian Shares S&P/ASX 200 Acc. Index 0.3% 13.6% -3.1%
International Shares MSCI World Ex Aust Unhedged A$ -0.4% 9.2% 0.9%
International Shares MSCI World Ex Aust Hedged A$ -0.8% 17.9% 10.1%
US Shares S&P 500 Index -1.0% 20.9% 17.2%
UK Shares FTSE 100 Index -0.8% 5.6% -9.2%
Japanese Shares Nikkei 225 Index 0.8% 25.1% 21.5%
Australian Listed Property S&P/ASX 200 A-REIT Index -4.1% 16.3% -14.0%
Australian Fixed Interest Bloomberg AusBond Composite Index -0.4% 0.5% 1.7%
Australian Cash Bloomberg AusBond Bank Bill Index 0.0% 0.0% 0.3%
Currency AUD/USD -0.9% 10.4% 13.9%

*Percentage change in returns are for periods over the month of January (Month), the financial year 1 July 2020 to 31 January 2021 (FYTD) and for the year 31 January 2020 to 31 January 2021 (1 year). Past performance is not an indication of future performance.