Shares in London closed at their highest level since late February as investors ignored record COVID-19 deaths and warnings from a veteran City guru that an epic bubble of Wall Street crash proportions was bound to burst. Stock markets around the world rose as optimism that mass vaccinations would ensure a rapid global economic recovery was strengthened by signs that the Democrats had won both vacant Senate seats in Georgia. With Joe Biden installed as US president, news that the Democrats would control both houses of Congress boosted hopes of a bigger-than-expected US stimulus package. The FTSE 100 index closed 229.61 points higher at 6,841.86, after a rise of almost 3.5% that took it to within 800 points of its pre-crisis level. The rally was underpinned by a surge in oil prices, which made shares in energy companies more attractive, and by strong demand for shares in banks. What investors are trying to figure out is how quickly the Democrats would be able to introduce their tax agenda if they take control of the Senate, and would they be more likely to act on regulation on big tech. The optimistic mood on stock markets came despite evidence that record infection rates in the US were leading to a slowdown in the jobs market, and hints from ministers in the UK that the lockdown announced this week could last until at least March. Jeremy Grantham, the British co-founder of the US investment firm GMO, said in a letter to clients that current investor behaviour bore the hallmarks of the mood in the run-up to the 1929 Wall Street crash. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behaviour, some believe this event will be recorded as one of the great bubbles of financial history. If, indeed it is one, these great bubbles are where fortunes are made and lost. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of January 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.