February 1, 2021

Written by Sid Mohapatra 

Although we cover and provide a broad summary of financial markets, I would be remiss if I don’t shed some light on the $GME saga. I do believe it has been covered extensively in other media platforms but this ticker captured the imagination of the entire world and definitely exposed fragilities of market makers and brokers when targeted with weaponized gamma and belligerently manufactured short squeezes. From the sidelines, it’s the perfect set-up of a David vs Goliath tale but I fear this can mimic Bridgewater’s risk-parity trade that went awry in March 2020 during the corona crisis last year with historic correlations breaking down and driving volatility across asset classes. 

North American equities finished the week with their largest weekly loss in the last quarter as remarkable levels of market uncertainties persisted highlighting as well as raising concerns of frothy levels of speculation and risk-taking by retail traders. Although Canada has shown resilience with a strong GDP print in the latest reading while the US sees consolidation in economic activity as consumers slowed down spending and appeared to exercise more caution. We continue to maintain that economy will continue to recuperate throughout the year on the back of the rollout of vaccines as well as economic support from monetary and fiscal stimulus payments.

The TSX closed at 17,337 losing 2.90% for the week and S&P 500 shedding closed to 3.5% while closing at 3,714. The markets next week will continue to monitor the speculative tickers before bringing down volatility and a sense of usual calm that has prevailed since March of last year.

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