November has been a quiet month for a nation under lockdown but results of highly anticipated events has created a tumultuous news feed. At the time of writing, Biden has won the US election, Covid-19 vaccines appear to have better efficiency than expected and now we just need this week’s “Brexit final crunch” to come to fruition and our trio of 2020 market headwinds will have weakened – even if not fully resolved.
Biden’s victory should signal positivity for the US market in the coming years. His centralist policies are likely to undo a large portion of Trump’s executive orders. A re-entry into international treaties, an increase in corporate tax rates from 21% to 28% (pre-Trump: 35%) and support for a Biden-version of Obamacare all should bring more stability to what has been a turbulent past four years. It looks likely that despite Biden winning a record number of votes, the ‘split ticket’ nature of US voters will mean that the Republicans will retain control of the senate softening some of the more-left leaning policies that might have otherwise passed if the Democrats had control of both houses.
It is worth mentioning that although Biden has been granted transitional powers, Trump himself has not yet conceded the presidency, instead choosing to take legal action amidst rumours of suspicious democratic results. Whilst we do not see anything materialising from this, it is something we continue to monitor.
We also had the exciting news that three separate companies announced successful vaccine trials – all with greater than 90% efficiency in some form or another. Despite the challenges that inoculating billions of people brings, a vaccine breakthrough should help return life and the economy to a larger sense of ‘normal’.
Another month has gone by with new Brexit deadlines, quickly followed by collapses in negotiations. Our view is that there will a fudged last-minute deal with the most controversial of topics further delayed. A pure no deal Brexit would be disastrous for the UK economy and so concessions are likely to be made to stop this happening. Of the three risks we have monitored in 2020, this is the one that is likely to continue into 2021.
In light of these events, we have seen global stock markets rally considerably in November (MSCI World up 12.77%), with the US reaching another record high and the S&P 500 potentially on track for its best ever month. UK and Europe have recovered even more strongly with a recovery in the worse hit areas of the market due to Covid-19. Airlines (+60%), Oil Majors (+50%) and Banks (+25%) have risen sharply in what has been a strong sector rotation from technology and e-commerce industries. Our portfolios were generally positioned well for this and we believe there is still more to go, this will create an opportunity to take profits on our recovering stocks and invest into areas we see progressing into 2021 and beyond.
We are forward looking and constantly seeking the next risk and opportunity within the market. Discussion and debate into the next big market events have begun and we will update you as things develop.
Important Information
This update is for information only and does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it. The views and opinions within this document are those of Casterbridge Wealth at time of writing and may change without notice. They should not be viewed as indicating any guarantee of return from an investment managed by Casterbridge Wealth nor as advice of any nature. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.
