Please see article below from Brooks Macdonald received today 28/10/2020.
Brooks Macdonald – Daily Investment Bulletin
What has happened
Coronavirus malaise continues to grip markets with European and US equities recording losses. European equities have been underperforming the US of late, in part due to Europe being the main focus of this second wave but also the cyclical tilt in the European indices which suffer as near-term economic activity looks more uncertain.
Coronavirus restriction update
The day by day movements in COVID-19 restrictions will likely dominate markets over the coming weeks, particularly if the US election proves to be a drawn-out affair. France and Germany are expected to move into a form of lockdown over the coming few days, this will represent the culmination of the relative willingness for tight restrictions on social activity and hospitality with bars and restaurants expected to be shut. The next step will be tough decisions over whether to close schools and businesses in a return to the restrictions seen earlier in the year, it is mainly this step that markets are worried about. Add in the fact we are moving into the colder months, and flu season, and the market is struggling to be optimistic about the coming 3/6 months.
‘Filibuster’ is the most important word in the US Election
With only a week to go until the US Election, much discussion focuses on the implications of any change at the White House. With Joe Biden’s current polling lead, and early polling which has likely already translated that into votes, the Senate is arguably far more important. Major legislative changes however require a House majority (which the Democrats have) and a filibuster-proof majority in the Senate. A filibuster is effectively a political procedure, through the medium of an exceptionally long speech, designed to slow down proceedings to a halt and prevent a vote on a piece of legislation. So, what can be done to prevent this? Either one party wins 60 Senate seats (highly unlikely), sufficient to pass a ‘cloture’ motion which effectively puts a time limit on any given debate or the new Senate votes to remove the filibuster for the entirely of the next session.
What does Brooks Macdonald think
Joe Biden has previously favoured a bipartisan approach to legislation and therefore may be intellectually against the idea of filibuster reform which hugely strengthens the incumbent party. That said, with the Supreme Court now having a 6/3 conservative majority, the Democrats may want the additional power to ‘pack’ the court to create a more balanced bench. This will arguably be the most important, and fascinating aspect of US politics in the coming months.
Source: Bloomberg as at 28/10/20
Philip Penrose
Business Development Manager
A good brief commentary from Brooks Macdonald giving updates on the latest Coronavirus restrictions and the US election.
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Charlotte Ennis
28/10/2020