October 2020 Markets in a Minute

Posted by siteadmin on Thursday 19th of November 2020.

Market performance October 2020 and your investments

Our Advisers speak regularly with specialist investment analyst professionals to provide us greater insight into market conditions which we are sharing with you below. 

As always, please let us know if you have any feedback, questions or concerns by contacting our office at: office@face-uk.com. 

COVID and lockdowns repeat 

  • Unsurprisingly, it was the resurgence of COVID-19 cases in almost all countries that continued to provide the main challenge for risk assets. Markets continued to struggle to digest the fine balancing act between restrictions of movement and the knock-on effects on business across all sectors.
  • A new set of lockdown restrictions was introduced in the UK and other countries as governments try to control the resurgence and to aim for some form of ‘normal’ Christmas. France reported more than 40,000 new cases for the first time and at least eight other European nations also recorded record infections.
  • Additional support pledged by governments to cope with second lockdowns did little to excite markets.

Brexit in the background
Brexit rumbled on and there was some good news from Japan.

  • The U.K. and the European Union resumed talks over a post-Brexit trade deal amid growing signs an accord is in sight. The aim was to reach an agreement by the middle of November, according to officials. 
  • On a more positive note, the U.K. signed a trade deal with Japan, its first with a major economy since Brexit. The deal mostly preserves the terms under which we already traded, but it’s estimated that this deal will increase Britain’s GDP by 0.07% compared to 2018 levels over the next 15 years.

US elections take centre stage

  • Early November attention shifted firmly to the US elections. Initial confirmation that a 'clean sweep' of the White House and Congress by Democrats was off the table and led markets higher.
  • After a week of tense counting in a number of closely-contested states further optimism arrived when it was confirmed that Joe Biden would become the 46th President of the United States. The transition of power looks set to take place and the final outcome was the best of both worlds for stocks. While Biden may still have a host of law-suits from Trump to contend with, there remains a confidence that these legal pursuits are nothing more than a bid to save face.
  • The election of Biden removes a sizeable amount of uncertainty and will likely result in an easing of trade wars that should boost global growth and corporate earnings. If the Senate is controlled by Republicans, Trump's tax cuts, pro-business policies and deregulation initiatives should stay in place.
  • The stock market dodged a bullet with no so-called ‘blue wave’ as the planned increase of corporate taxes, capital gain taxes, and more progressive policies would have negatively affected sentiment.
  • Stock market volatility could well be lower under Biden too with less chance of market disrupting tweets catching investors by surprise.

A double shot for markets 

  • Stocks surged on 9th November following breaking news on the Covid-19 vaccine being developed by Pfizer and BioNTech. The vaccine prevented more than 90% of infections in a study of tens of thousands of volunteers.
  • This is a major step in the right direction, as an effective and approved vaccine remains key to achieving full macro recovery. However, investment partners caution there is still some way to regulatory approval.
  • The speed of vaccine acquisition and distribution will be crucial to a country’s ability to bounce back.

Our investment partners have worked to ensure investment portfolios are well positioned to take advantage of the positive moves from markets more recently. Whilst they welcome the positive news seen over the last month, they are conscious that markets tend to overreact in the short term.
The importance of a well-diversified portfolio remains paramount and there will be no meaningful adding to equities at this stage.