Blogs

Please see the below article from AJ Bell received late yesterday afternoon:

AstraZeneca and Johnson & Johnson say they don’t intend to profit from the pandemic.

The price of Covid-19 vaccines have been put under the spotlight after Pfizer said it should generate around $15 billion in sales during 2021 from its Covid-19 vaccine, higher than its previous estimate. Pfizer’s global vaccine sales before the pandemic were around $33 billion.

AstraZeneca (AZN) has always maintained that it will supply its vaccine at cost in perpetuity to low and middle-income countries. For other countries, the company has priced its vaccine at under $4 per dose, the cheapest of the three approved mainstream drugs, although South Africa revealed it had paid $5.25 compared with the $2.15 paid by the EU.

Johnson & Johnson’s vaccine has a price tag of $10 a dose which is competitive with AstraZeneca if only one dose is needed.

The Pfizer/BioNTech vaccine is priced at $20 a dose while Moderna’s is the most expensive at around $37 or close to 10 times the cost of AstraZeneca’s.

Rich nations would reap huge economic benefits if they paid the approximate $27 billion costs to vaccinate developing nations against Covid-19, according to a study commissioned by the Chamber of Commerce Research Foundation.

The report concluded that failure to act would cost the global economy $9.2 trillion, half of which would fall on rich nations.

This puts into perspective the spat between the UK and the EU over a shortfall in deliveries of AstraZeneca’s Covid vaccine.

AstraZeneca warned the EU that it could only supply a quarter of the initial 100 million doses in the first three months of the year due to supply chain issues. The EU has ordered 300 million doses with an option for a further 100 million. The EU Medicines Agency approved the AstraZeneca vaccine for emergency use on 29 January.

US biotech firm Moderna caused dismay after it told France and Italy it was delivering 20% fewer doses than promised. Similarly, the UK’s first approved vaccine from Pfizer/BioNTech has suffered delivery delays highlighting the logistical challenges faced by companies in meeting demand.

The good news is that two new vaccines could be available soon after Johnson & Johnson’s vaccine showed 66% effectiveness in phase three trials and Novavax’s vaccine was said to 89% effective according to interim trial data.

The Johnson & Johnson vaccine is potentially game changing because it only requires one dose and can be stored and transported at normal refrigerator temperatures. Novavax said its vaccine performed well against the new, more virulent strains.

Data from the National Audit Office shows the UK has secured 267 million doses of five different vaccines at a cost of $2.9 billion.

Please keep checking back for more updates.

Andrew Lloyd

05/02/2021

Please see investment bulletin below from Brooks Macdonald received this afternoon – 04/02/2021

What has happened

After a volatile week where vaccine news varied and retail trades in specific stocks raised concerns of bubbles, global equities had a relatively quiet day. Risk sentiment was helped with growing expectations that former ECB President Draghi would succeed in forming a government and this heralded a significant outperformance from both Italian bonds and the Italian equities index.

Stimulus update

US Treasury yields continued their rally yesterday with the 10-year nudging up to 1.137% as expectations for stimulus increased and therefore expectations for, on the margin, higher inflation and higher interest rates down the line. President Biden told House Democrats that his concern was that the next round of stimulus would risk under-stimulating rather than over-stimulating the economy. This comes as Democrats have opened budget reconciliation measures to put pressure on Senate Republicans to revise their stimulus proposals. Biden’s comments suggest that should the Democrats be forced to the use the reconciliation process, knowing that this is probably their only chance for significant stimulus in 2021, they may increase the size of the stimulus. Despite the relatively quiet market at an index level, these comments helped support cyclical equities, which were previously out of favour due to the mixed COVID narrative, with Energy and Banks performing strongly.

European inflation

Inflation data from the Euro Area surprised to the upside yesterday with headline inflation up 0.9% year on year (vs 0.6% expected) and core inflation up 1.4% (against 0.9% expected). This brings an end to the deflationary period that the Euro area has been experiencing for more than half a year, but this data did support a pro-cyclical tilt to yesterday’s markets. This surprise pick-up in inflation led to the market revising expectations of future inflation levels with the 5y5y (expectations of 5-year average inflation levels in 5 years’ time) up to 1.38%, the highest level since the pandemic begun.

What does Brooks Macdonald think

We would be wary of reading an excessive amount into the inflation data from the Euro Area yesterday. There are some specific factors at play here such as the end of a temporary VAT cut in Germany and equally 0.9% headline inflation is not a particularly exciting number. Looking forward we see COVID as having created a significant output gap due to higher unemployment rates, indeed in some countries stimulus measures have masked the true level of unemployment. Until there is active competition for labour driven by fuller employment, wage inflation will remain subdued and that should calm expectations of a rapid and sustained rise in inflation above the ECB’s target.

Source: Bloomberg as at 04/02/2021

Please continue to check back for our latest updates and blog posts.

Charlotte Ennis

04/02/2021

Please see this weeks Markets in a Minute update from Brewin Dolphin:

Trading frenzy sees US equities post worst week since October.

Global equities posted sharp declines last week, as heightened volatility added to fears about the efficacy of the vaccine roll out. The S&P 500 recorded its worst week since October, falling 3.74%. The trading frenzy in GameStop and other targeted stocks led to the VIX, or ‘fear gauge’, ending the week at 32.4, well above its historical average. This fed through to Europe, where the VSTOXX, another measure of volatility, climbed to its highest level in almost three months. The FTSE 100 slid 4.3%, while the Dax declined by 3.79%. Investor jitters also affected stock markets in Asia, with the Nikkei down 4.63% and the Hang Seng down 4.39%. In China, where there are growing fears of a stock market bubble, the Shanghai Composite slipped 3.61%.

Last week’s markets performance*

• FTSE100: -4.30%
• S&P500: -3.74%
• Dow: -3.70%
• Nasdaq: -3.91%
• Dax: -3.79%
• Hang Seng: -4.39%
• Shanghai Composite: -3.61%
• Nikkei: -4.63%

*Data from close on Friday 22 January to close of business on Friday 29 January.

Markets rebound from last week’s rout

US equities rounded on Monday, posting their biggest rally in ten weeks, after analysts said the explosion of speculative buying would not cause a significant setback for markets. Tech stocks performed particularly strongly ahead of Tuesday’s earnings figures from Amazon and Alphabet. The S&P 500 climbed 1.6% and the Nasdaq jumped 2.6%.

Wall Street’s strong open led to the FTSE 100 closing up 0.9% on Monday, with JD Sports Fashion rising 7% to 799p on news it has agreed to buy American rival DTLR Villa. Retail investors turned their attention to silver, which hit $30 for the first time since 2013. The pan-European STOXX 600 increased 1.2%, with shares of miners surging by between 5% and 20% on the back of silver’s rise.

The FTSE 100 was up 0.6% in early trading on Tuesday, on growing hopes the US will agree an economic stimulus package. Virgin Money was one of the strongest gainers, rising 2.7% after announcing it had returned to profit in the first quarter.

Short squeezes dominate the headlines

In ordinary circumstances, last week would have been dominated by the raft of quarterly financial results from major S&P 500 stocks. Instead, the bulk of investor and media attention was on extreme fluctuations in the prices of small retail stocks. GameStop posted a weekly gain of 400%, resulting in major losses on short positions.

Trading in heavily shorted names resulted in historic trading volumes, with more than 23.6 billion shares of US stocks exchanged on Wednesday, according to Bloomberg. The Goldman Sachs Hedge Industry VIP index, which seeks to replicate the favoured long positions of hedge funds, suggests hedge funds have had to trim their longs to cover losses or deleveraging on their short books.

After Robinhood and other brokers restricted trading on Thursday, the US Securities and Exchange Commission announced it would review the restrictions and that it was “closely monitoring and evaluating the extreme price volatility”.

The trading frenzy overshadowed the generally good start to the US earnings season. We are about a third of the way through the season and, so far, 80% of companies have beaten expectations. Microsoft, Apple and Facebook all released strong quarterly results, yet Apple and Facebook declined by around 5% last week, while Microsoft edged up 2.4%.

Economic data continues to disappoint

Last week saw grim economic data from several countries around the world. Although the US economy experienced a strong rebound in the second half, this wasn’t enough to prevent it shrinking in 2020 for the first time since the financial crisis. Growth is expected to pick up once the pandemic is under control, but there is still a long way to go. Consumer spending slowed to 2.5% in the fourth quarter, down from a 41% rebound in the third quarter. Overall spending on goods also slowed.

Across the pond, UK retail sales for December were lower than expected, rising by just 0.3% versus a 1.2% forecast. In 2020 as a whole, retail sales plunged by 1.9%, marking the worst year for consumer spending on record. The strong pound also weighed on the FTSE 100, which derives around 70% of its earnings from overseas. Pearson was one of the few bright spots, rising by 13.7% last week.

Continuing lockdowns resulted in the German government cutting its 2021 GDP growth forecast from 4.4% to 3%, despite the economy expanding by 0.1% in the fourth quarter. France’s economy shrank by 1.3% in the fourth quarter, but this was better than expectations of a 4.1% contraction.

Vaccine roll out in jeopardy

Concerns about the economic impact of the pandemic and slow vaccine roll out continued to weigh on major European stock markets last week. The EU’s vaccination strategy is in disarray and many countries have had to suspend vaccinations because of shortfalls. Rolling out the vaccine is seen as a critical part of global economic recovery.

The World Bank has warned of double-dip recessions in Japan, the eurozone and the UK, partly because of ongoing lockdown measures. In Japan, three quarters of companies across 32 industries have trimmed their capital expenditure plans by an average of 2.9%, and manufacturers have reduced their forecasts by 3.8%.

Data released yesterday also signalled a slowdown in China’s economic recovery, with the Caixin manufacturing PMI falling from 53 to 51.5 in January, the lowest level since July. The official manufacturing and non-manufacturing PMIs also fell by more than expected. This came after a week in which a senior adviser to China’s central bank warned of the increasing risk of an asset bubble unless monetary policy was not tightened.

More positively, the International Monetary Fund has upped its global economic growth forecast by 0.3 percentage points to 5.5%, although it warned emerging markets’ limited access to vaccines could harm global financial stability.

As market volatility continues, please keep checking back for further market commentary and updates shared by us to help keep you informed.

Andrew Lloyd

03/02/2021

Please see below an article published by A.J. Bell on Thursday, 28^th January and received Sunday morning which provides an overview of the U.S. Stock Market:

As you can see from the above, U.S. equities remain expensive and there are arguments for both holding and not holding U.S. Equities. There could still be some upside to be captured in this market, but it is worth reminding you of the importance of holding a diversified portfolio, which is invested in multiple sectors and geographies so that all your eggs are not in one basket.

Please continue to check our Blog content for advice and planning issues and the latest investment, markets and economic updates from leading investment houses.

Please keep safe and healthy.

Carl Mitchell – Dip PFS

IFA and Paraplanner

01/02/2021

Please see the below market update from Invesco received late yesterday afternoon:

Overview

Europe: Europe is clearly at risk of a double-dip recession, albeit a modest one.

The UK: The UK appears to be at even greater risk than the eurozone of a double-dip recession in the current quarter.

The US: US markets seem to have focused recently on the potential for additional fiscal stimulus.

What a week — both the S&P 500 and NASDAQ Composite Indexes reached all-time highs last Thursday, but we also saw a reversal of the rotation from growth/defensives to cyclicals in both European and US markets. Markets are clearly reacting to the problems that many economies are facing as COVID-19 continues to impact growth. Recent data shows evidence of these problems.

Europe may face a modest recession

Europe is clearly at risk of a double-dip recession, albeit a modest one. The IHS Markit Flash Eurozone Composite PMI (Purchasing Managers Index) clocked in at 47.5, down from December’s 49.1.1 And it’s not just services that drug down that number; there was also a decline in manufacturing PMI, which actually fell to a seven-month low. And the weakness was spread throughout Europe.

This should come as no surprise. The Oxford Blavatnik Stringency Index, which tracks the level of economic lockdowns in various countries, indicates that stringency in many European countries is at or near the highest levels that have been experienced since the start of the pandemic. In other words, first-quarter economic activity could contract again, although if it does, I would expect this to be a very shallow contraction. More fiscal support is coming, and I expect the European Central Bank to remain supportive.

And so Europe just needs to get through this “fifth quarter of 2020,” and then I expect the situation to improve. I think that by later in the second quarter we will see improvement in economic activity as vaccine distribution becomes widespread.

The UK get more bad news

The UK is in a worse situation, at an even greater risk than the eurozone of a double-dip recession in the current quarter. The preliminary reading of the IHS Markit/CIPS UK Composite PMI fell like a lead balloon, dropping from 50.4 in December to 40.6 in January.1 Chris Williamson, chief economist at IHS Markit, explained the drop in the composite: “Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.”

What’s more, on Friday UK Prime Minister Boris Johnson shared more bad news: 1) the UK strain of the virus is not only more contagious but appears to be more deadly; 2) lockdowns might last until this summer. And so we should not expect economic strength in the near term, although I maintain that the economy is very likely to rebound substantially as vaccines are distributed.

Japan suffering too

Flash PMI readings for January indicate Japan is facing some headwinds too. Also last week the Bank of Japan warned of increasing risks to the economic outlook for Japan, and that efforts to control the virus could have impact beyond just the services sector. And while COVID-19 has been well-controlled in Japan relative to many Western countries, Japan has not yet rolled out any vaccines. They are still in clinical trials, but rollout is expected to start by late February

The US awaits the fate of fiscal stimulus

The US is also facing serious economic headwinds due to COVID. US markets seem to have focused recently on the potential for additional fiscal stimulus. Janet Yellen, President Joe Biden’s nominee to be US Treasury Secretary, made a strong case for more fiscal stimulus last week. She recognized concerns about growing debt levels, but also argued that there’s no time like the present to borrow since rates are so low. However, by the end of the week there was concern that President Biden would not have enough support to get his proposed $1.9 trillion package passed.

On days when markets are encouraged by the likelihood of more stimulus and a stronger rebound, cyclical stocks have outperformed. But when markets are worried that no more stimulus is forthcoming, or when economic data disappoints, secular growth stocks — especially tech — have outperformed.

Key takeaways

I expect this “seesaw” stock market behavior to continue in the near term. While I still believe a strong economic rebound is in the offing later in 2021, there are likely to be glitches before we get there, as I have warned before. The tech sector has recently exhibited defensive qualities that I expect to continue and which I believe could be valuable in the next few months as we slog through what is likely to be a difficult time for the economy. Low interest rates help this situation given that tech valuations are admittedly stretched; investors have historically been more forgiving of valuations with rates so low.

The other side of the seesaw is exposure to cyclicals. I am most excited about one sector in particular: consumer discretionary. I think the global economic recovery will be robust and inclusive, creating and restoring jobs — and spurring consumers to spend. And in many countries, consumers have built up impressive savings because of a lack of spending during the pandemic. This could be deployed rather quickly once vaccines are distributed broadly and there is a return to something akin to “normalcy.”

I expect that, in a world awash in monetary stimulus, with significant fiscal stimulus as well, there will continue to be an upward bias for stocks. That doesn’t mean we won’t see a stock sell-off in 2021. It could be triggered by the 10-year US Treasury yield rising (we could see a sell-off if it rises too quickly) or fears about inflation increasing — even though I expect the Federal Reserve to reiterate this week its commitment to remain very accommodative and tolerant of a spike in inflation over its target. There could be other triggers — a continued rise in infections, especially more serious strains, or a slowdown in vaccine rollouts. We don’t know when this could occur — and while I believe it would be short-lived, I also believe it’s very important to be broadly diversified both across and within stocks, bonds and alternatives.

While broad diversification is critical, investors could consider overweighting both the technology and consumer discretionary sectors within their equity sleeve. Both could serve different purposes in a portfolio — one offering some defensive qualities while the other offering the potential to participate in the recovery.

Please keep checking back for more market updates, investment commentary and a range of different blog content from us.

Andrew Lloyd

28/01/2021