William John Market Report 21-01-21
William John assesses the equity, fixed income and forex markets in recent weeks.
William John, Forex, Equities, Currency, Bonds, Capital Bonds, Interest Rates


William John Market Report 21-01-21

Category: Reports

US and European Equities continued to gain on major indices including the S&P 500, FTSE 100 and the European STOXX 600 over the past few weeks. As earnings for major companies are released for the third quarter, the market consensus has been that earnings across the board have managed to outpace current macroeconomic mitigating factors, namely inflation and supply chain disruptions – including the “ping-demic” that ravaged manufacturing throughout August and September in the UK. Observing the S&P 500 over the past week:

Source: William John Analytics, Yahoo Finance

For example Nestlé, the world’s largest food maker, announced it had raised prices by 2.1% in the third quarter. The prices rises, reflected in goods such as KitKat, Nespresso coffee pods and Purina cat food, were justified on the basis of the ongoing inflationary pressures as well as rising energy costs. Whilst the company said it would stagger passing off rising costs to consumers, it did expect margin improvements across a range of its products over the medium term. 

Questions remain as to whether blue-chip companies in consumer retail product lines will be able to continue to pass off costs over the long term to consumers without a detrimental effect on Aggregate Demand – especially if wages do not keep up with rising price levels – however the market view is in line with the Central Banking view that inflation is “temporary” and will not persist beyond 2023, by which point most influential banks will be reversing their expansionary monetary policies and tapering their quantitative easing programmes. 

Meanwhile, U.S. Treasury bonds – one of the most liquid bonds available in the public fixed income markets and widely considered a safe haven for investors as they are guaranteed by the U.S. Treasury, saw its yield rise to 1.65% on its 10-year maturity bonds on 19/10 (see next page). This is the highest the 10-year Treasury yield has been since mid-May, according to the Financial Times, suggesting that investor concerns are mounting over inflation in the fixed-income markets. Yields on major fixed-income securities tend to rise as inflation reduces the real returns on the coupons or fixed income on bonds, promoting investors to sell them, increasing yield.

Source: William John Analytics, U.S. Department of the Treasury

Looking at currencies, current exchange rates can be summarised as follows: 


£1 as of 19/10/21

US Dollar




Japanese Yen


Chinese Yuan


Hong Kong Dollar


Source: William John Analytics, Bank of England

Theoretically, when markets anticipate a rise in interest rates relative to other economies, investors tend to move their capital into accounts or investments in the country with the highest interest – earning the most money and causing a rise (or appreciation) in the currency because of inward capital flows. However, as it stands, all three major western central banking programmes – the US, UK, and European macroeconomic policies – are all hesitant to raise interest rates just yet, and so current exchange rates are trading flat throughout October. This is likely to change over the next year or so as base interest rates are raised, that is, if they are at all.  

Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.