Global Market Overview – November 2020

 The US election kicked off November, with Joe Biden ultimately achieving victory over Donald Trump. Markets responded positively despite the former President’s ongoing (and somewhat desperate) attempts to claim victory via the courts. The US is now set for a period led by a Democratic president and a Republican senate – which has historically been a combination delivering the highest annual returns for equities.

Only days after the election, Pfizer-BioNTech announced trials of their COVID-19 vaccine had been highly effective. A week later Moderna made an identical announcement, followed by Astra Zeneca. An end to the pandemic is now far more likely than it has ever seemed.

Until widespread vaccination takes place though, not much has changed. Lockdowns have helped to curb the number of new virus cases, but at the expense of the physical economy. In the UK, Arcadia Group is fighting to stay out of administration. Conventional high street retailing will be one of the permanent casualties of COVID-19. The question is whether most people will even notice.

Overall though, November was a very positive month. The venerable (although largely irrelevant) Dow Jones Industrial Average made headlines for reaching 30,000. The more modern S&P 500 hit new highs, and European equities had one of the strongest months in history.

Within the overall rally, the big story has been the bounce back of cyclical stocks and sectors that were worst affected by the pandemic. Companies like Carnival Cruises and HSBC generated returns of around 50% and 25%. The big tech companies struggled as investors shift away from the likes of Amazon and Google for the first time this year.

Core views

The recovery is already happening… The world has never seen as much coordinated stimulus as in the past five months. A V-shaped economic recovery is our base-case; with some areas like China already nearly back to normal. As the recovery continues, and turns into an expansion, we want to be exposed to it.

The virus won’t derail this growth… Lockdowns are unlikely to be as severe and as widespread as previously. At the same time government support is massive and immediate. Looking at the long term and looking globally, there is more economic good news than bad news – despite how it can feel in the UK at the moment.

Summary

Investors should try to focus on the fact that investing in the stock market over the long term, is a powerful tool to preserve the purchasing power of their wealth and on ensuring that they have an appropriate asset allocation for the level of risk with which they feel comfortable. A disciplined approach to asset allocation and identifying good active managers who can navigate these conditions successfully remains of the utmost importance.

 

November 2020

With thanks to Seven Investment Management LLP for their views and market thoughts.

RiverPeak Wealth Limited

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