Please see below update received from Brooks Macdonald this morning. It explains where the markets stood by the end of November, as the world continues to wait for vital vaccine efficacy results in the fight against Covid-19.
What has happened
With yesterday’s close November capped off one of the best months of performance for global assets. The quid pro quo was weakness in safe havens such as the US dollar and gold, but sovereign bonds were remarkably resilient as monetary accommodation outweighed the changing vaccine winds.
OPEC+ delayed
The OPEC+ meeting that was planned for today has been pushed back to Thursday as members needed to have further discussions ahead of the summit. The main items on the agenda is whether or not to keep to a planned easing of supply cuts from the start of January. The oil price is walking a tightrope at the moment, with vaccine hopes for a faster recovery on one side, against continued COVID risks during the winter months on the other. As well as trying to judge the likely pace and scale of the nascent global economic recovery, OPEC+ members also have the challenge of keeping production discipline intact. Should OPEC+ members break ranks on production, this risks a lot more volatility for the oil price as well as uncertainty for the energy sensitive parts of the market.
COVID update
Whilst we didn’t, as expected, see any new vaccine efficacy results yesterday the incremental vaccine news continued. Moderna announced that it would request emergency authorisation from both the US and EU regulator and Novavax said that its UK study was expecting results soon. Meanwhile cases continue to fall in Europe with the UK seeeing its 7-day average move to early October levels and France seeing its lowest daily case rise since August. Of course, the UK partial lockdown is about to ease so there will be a knock-on impact on cases down the line, but this will all occur with a familiar lag. In the US we have seen cases continue to rise particularly in the original hot spot, New York, and the summer hot spot of California.
What does Brooks Macdonald think
Whilst November was an exceptionally strong month for equity returns the relative outperformance of cyclical equities over defensives was the main story. Selectivity remains key within the cyclical sectors as there are some areas, such as bricks and mortar retail, that have likely seen their decline accelerated by the pandemic. For others, such as airlines, it’s too early to say whether COVID-19 will cause a permanent reduction in business travel for example. This may prevent some sectors from rallying to their start of year levels for some time.
We will continue to publish relevant content and market updates as we enter the final month of a challenging year. Please check in again with us soon.
Stay safe.
Chloe
01/12/2020