2021 Kicks-Off with Lockdown in UK Sell-Off in US Market

The New Year started with a new lockdown in the United Kingdom and a sell-off in the U.S. stock market.

In the first trading day of 2021, the Dow lost 1.3%, the S&P 500 closed 1.5% lower, and the Nasdaq Composite dropped 1.5%.

This Monday, new concerns about the global spread of the coronavirus emerged.

The British Prime Minister Boris Johnson reimposed a lockdown in England expected to last until mid-February as new cases and hospitalizations rose after discovering a new variant of the virus, this one much more contagious. 

This Monday, the country recorded more than 50,000 new Covid-19 cases for the seventh consecutive day.

Some of the measures announced are the same imposed last Spring, during the first wave of the coronavirus in the UK. Among the new rules, people can’t leave their homes except for medical needs, to buy food, exercise, and work if the home office is not possible. Schools and colleges will close. Restaurants will be open only for takeaway.

Unlike March’s lockdown, though, nurseries will not be shuttered, elite sports are allowed to go ahead, and places of worship will remain open if people attending follow social distancing rules. 

The fast-spreading Covid-19 variant first reported in the UK was already detected in more than 30 countries, including the U.S. It was first discovered in Colorado last week, and since then, it was found in California and New York.

Scientists have no evidence so far that the new variant, called B117, is more lethal or causes more severe Covid symptoms, but some estimate it’s 70% more transmissible than the existing ones.

With a spike in the number of cases underway in the next couple of weeks, a post-holiday effect is expected worldwide.

Weighing in the financial market and the uncertainty regarding the election in Georgia this Tuesday, which outcome will decide which party will hold the Senate control. If Democrats win both seats, they will take it back from Republicans.

If Democrats win, some expect this scenario would hurt the stock market. In this case, controlling the House and the Senate, Democrats would be able to impose higher corporate taxes, stricter regulations and propose significant legislative changes.

“Should the Democrats win both seats, we expect the S&P 500 to become vulnerable to a downdraft in the neighborhood of 6% to 10%,” wrote Oppenheimer strategist John Stoltzfus in a note to investors. “In our experience, the markets prefer that Washington’s Capitol Hill have enough checks and balances in place to keep political power out of just one party’s hands,” he added.

The polls are set to close in Georgia this Tuesday at 7 pm ET. But since a tight contest is expected, the results may not be known for several days.