While everyone was pleased to see the end of 2020, the worst of the COVID-19 epidemic is clearly not yet over.  Neighbouring European countries have closed their borders to U.K. travellers with trucking and freight into the U.K. in some cases also temporarily suspended.  A new variant is spreading throughout London and the City is once again in total lockdown, all of which will reduce economic output from an already fragile economy.  On a more positive note, early indications from major pharmaceutical companies suggest that the existing treatments might be effective against these new strains.

Global monetary policy has clearly helped fuel the stock market rally as evidenced by the Fed’s commitment to leave the federal funds rate near zero until it sees evidence that inflation has risen above its 2% target.  This has further flattened the yield curve and supported asset prices with the S&P500 Index increasing by 3.7% during the month.  The other major markets performed similarly with the MSCI World Index up by 4.1%, the CAC up 0.6% and the DAX up 3.2%.

The positive announcement that a no-deal Brexit had been averted at the eleventh hour gave further impetus to the UK market with the FTSE 250 Index closing up by 5.96% for the month.  The small cap stocks again performed better than large cap stocks with the Small Cap Index increasing by 6.2% as compared to the FTSE 100 Index which only increased by only 3.1%.  The AIM All Share Index was the best performer, increased by 10.1%, while the Fledgling Index increased by 7.4% during the month.

In spite of a continuing sector rotation between growth and value, our growth-oriented portfolio increased by 6.74% during the month producing an overall return of 3.53% for the year as compared to the FTSE 100 which declined by 14.34%.  Allowing for expenses, the NAV increased by 6.51% over the month.  On the other hand, dividends amounting to approximately 15% of total receipts for the year have been cancelled or reversed as companies focused on conserving cash.  We remained fully invested and made no changes to our existing positions during December with cash comprising 3.4% of the portfolio at month end.