Please see below the latest bulletin received from Brooks MacDonald this afternoon, which provides a refreshing update on the continuous rise in the markets following the US election result and the Pfizer vaccine news.
What has happened
The news from Pfizer/BioNTech catalysed a broad market rally across Europe although the momentum did fade at the latter end of the US session and coming into Asian markets. The rally had a decidedly cyclical skew with the unloved hospitality and leisure sectors seeing a sizeable boost.
The Pfizer vaccine
Given the squeezed timescales for a coronavirus vaccine, there were always many fears about the chances of a successful vaccine. One of the key determinants of ‘success’ is efficacy, and the Pfizer candidate is reporting over 90% which, for comparison, is hugely above that of the average flu vaccine which is around 50%. Politicians globally welcomed the news but advised caution that this would provide a quick win given the need to ramp up production and raised concerns around logistics given the vaccine needs to be deep frozen until the day of use. It is too early to say whether this vaccine news is a genuine game changer, but it is a salient reminder of how aggressively the under owned value and cyclical areas can snap back. Whilst the post pandemic world is likely to continue to be dominated by low growth, low inflation and low interest rates, favouring growth sectors, some balance is required given how cheap the cyclical/value areas of the market are.
Internal Market Bill falters
The House of Lords voted to remove the clauses from the internal market bill that would allow ministers to disallow elements of the EU withdrawal agreement. Despite this the government said it would progress with the provisions and add them back to the bill when it returns to Commons debate in December. The House of Lords defeat puts more pressure on PM Johnson as EU/UK trade talks reach their conclusions and President-Elect Biden’s victory swings the balance of power towards a multilateral approach to negotiation. Biden has previously warned that any destabilisation of the Northern Ireland peace process would make a US/UK trade deal very unlikely.
What does Brooks Macdonald think
Whilst a Biden win is not a surprise for markets, many of the existing risks and opportunities in the world need to be revisited with a fresh lens. Brexit is a particularly interesting case as the EU may feel emboldened by the prospect of closer US relations, possibly encouraging a more aggressive position with the UK. This risks an impasse with the UK at exactly the time when Sterling will need clarity over the state of EU/UK talks.
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World GBP | 1.4% | 5.7% | 1.8% | 8.8% | |
| MSCI UK All Cap GBP | 5.2% | 9.8% | 3.4% | -16.2% | |
| MSCI USA GBP | 0.9% | 5.3% | 1.0% | 13.9% | |
| MSCI EMU GBP | 4.9% | 11.0% | 2.6% | -0.3% | |
| MSCI AC Asia ex Japan GBP | 0.9% | 3.8% | 4.8% | 16.7% | |
| MSCI Japan GBP | -0.4% | 2.3% | 1.9% | 4.4% | |
| MSCI Emerging Markets GBP | 1.5% | 5.1% | 5.3% | 10.0% | |
| MSCI AC World IT GBP | -0.6% | 6.4% | -0.7% | 32.5% | |
| MSCI AC World Healthcare GBP | 0.3% | 5.2% | 0.4% | 12.0% | |
| Barclays Sterling Gilts GBP | -1.3% | -2.2% | -1.5% | 5.7% | |
| Barclays Sterling Corps GBP | -0.4% | -0.3% | 0.1% | 4.9% | |
| WTI Oil GBP | 8.6% | 7.5% | -1.7% | -33.4% | |
| Dollar per Sterling | 0.1% | 1.9% | 1.0% | -0.7% | |
| Euro per Sterling | 0.7% | 0.4% | 1.1% | -5.7% | |
| MSCI PIMFA Income | 1.7% | 4.3% | 1.4% | -1.6% | |
| MSCI PIMFA Balanced | 1.9% | 4.9% | 1.6% | -1.6% | |
| MSCI PIMFA Growth | 2.3% | 6.0% | 1.9% | -1.6% | |
Although this appears to be the light at the end of the tunnel, we are likely to see more volatility as the markets recover. Please check in again with us soon for further market data and news.
Stay safe.
Chloe
10/11/2020