January 2021 had a lot of drama, both politically and in the financial markets, with events that may have repercussions for some time. On January 5th, the state of Georgia had two Senate runoff elections which gave the Democrats and Republicans a 50-50 split, with the tiebreaker going to Vice-President Kamala Harris. The next day there was a clash at the Capitol Building as the Electoral College was in the process of certifying the Presidential election. As a result, the House of Representatives issued an Article of Impeachment against former President Donald Trump.
Later in the month the markets came under pressure due to intense “short squeezes” in a number of heavily “shorted” stocks – issues that were sold in the hope of buying them back at a lower price. As you will see later, the substantial movement in a few stocks caused leverage in some hedge funds to be reduced, thereby putting pressure on the major averages. As a result, the S&P 500 index fell 1.1 percent for the month after registering another record high.