We experienced another turbulent month with wild swings in both stocks and crypto to new all-time highs and back.
Covid infection rates continued to fall, the pace of vaccinations increased globally, and a new study from Israel involving 1.2 M people proved the effectiveness of Pfizer-BioNTech’s vaccine. All of this gave investors hope that the economy could improve in the second half of the year.
Fourth quarter earnings exceeded expectations and took the markets to new all-time highs. All of this seemed as well driven in no small part by the fear of missing out on further gains. Amazon posted its first quarterly revenue of more than $100 billion, but the stock still fell after the announcement that founder and CEO Jeff Bezos will be handing over the driver’s seat to Andy Jassy.
Bitcoin shortly climbed to over 58k following news that Tesla has invested 1.5 billion in the cryptocurrency. At the same time, MasterCard and Bank of New York also announced new crypto initiatives.
Shares of GameStop fell back to earth after weeks of volatile trading, not entirely surprisingly erasing 81% from their peak. While fee-free apps like RobinHood have democratized the stock market, the crisis has shown that they can distort investor behavior and undermine confidence when a bubble bursts.
Unprecedented low temperatures in the southern United States crippled large parts of the power grid, leaving 3 million homes and businesses without electricity. The ongoing fuel shortages have even begun to impact the oil market.
This, along with a looming reduction in monetary policy support, heightened fears of accelerating inflation. The Nasdaq technology index, which had largely benefited from low interest rates, sold off sharply before Federal Reserve Chairman Jerome Powell diffused inflation concerns.
He assured markets that interest rates would remain low, saying he did not expect inflation to stay significant despite rising prices and that the labor market was still far from full employment. His comments provided some reassurance at the end of the month and halted the price decline.
So after a wild February the S&P 500 ended at 2.6% and the MSCI World Index at 2.5%. 20-year bonds and gold fell another -5.7% and -6.3%, respectively.
Our strategies closed the month with mixed results: Universal ended at -2.1%, Progressive at 0.1% while CryptoMax set a new record returning 20.5% for February.
Again it is hard to tell what the future will bring, but in general we are still in a growing economy where companies continue to exceed expectations on both earnings and revenues. And in the crypto space we see an uptick in both institutional and retail investments promising more upside in the mid-term.
It all depends on how fast we can end the spread of the corona virus, how the world will look after that and how governments will handle interest rates going forward.
What I know for sure, particularly in volatile times like these, that a systematic approach is essential. We are investing for the next three to five years, not for the next three to five days or even months.
So welcome the adventure and fasten your seat belts.
Stay happy, healthy and wealthy!
Omar