Please see JP Morgan’s input below on the US Election:
Stay tuned for more updates on the US Election, as this is a fast developing story and we will aim to keep you posted throughout.
Andrew Lloyd
04/11/2020
Brooks Macdonald Blog – Election Day – All eyes on the U.S.
Please see below the latest bulletin from Brooks Macdonald, which was received earlier this morning and outlines their overview on the U.S. election so far:
What has happened
US equity futures and US Treasuries have both swung between gains and losses overnight as the US election results have started to roll in after polls closed. With key ‘swing states’ pointing to a much tighter overall race than expected, markets have had to recalibrate earlier expectations of a Democrat ‘blue wave’. Earlier, during regular trading hours on Tuesday, equity markets and government bond yields had both risen in tandem as investors focused their hopes for a post US election fiscal stimulus. On Tuesday, US ten year government bond yields had risen to their highest levels since June, and economically sensitive sectors including financials, industrials and consumer discretionary led, while gains in US technology shares also kept pace with the rally in the broader US equity market. However overnight, early voting results have suggested a much closer race than the polls had initially been expecting, and futures markets have braced for the risk that there might be a longer wait before a clear overall election result is known. While the race to the White House looks to be somewhat closer than first thought, an early clear winner has been the voting turnout. The latest update from the University of Florida’s US Elections Project (USEP) shows that more than 101m Americans cast their ballots before election day, easily beating past early voting election records, and equal to 73.4% of the entire 2016 election total votes. USEP also estimates that this puts the US on track for its highest voter participation in more than a century, with an estimated 160m votes or 67% turnout rate for those eligible to vote.
Early eyes on Florida, but it is not the only ‘swing state’.
As states race to count the expected record number of ballots, all eyes were on ‘bellwether state’ Florida. The state has a well-established process for counting early votes, and was always expected to be able to declare a result relatively early in the hours after polls closed. Of the two presidential candidates, Florida was considered more important for President Trump in order to keep any hopes of re-election alive. With 96% of the vote counted, Trump has held Florida, with 51.2% of the vote, against Biden’s 47.8%, and by a bigger margin than Trump won in the 2016 election. But Florida is not the only swing state. There are as many as a dozen or so ‘swing states’ to watch in the US election, which are states that historically have been closely divided politically. Alongside Florida (which has 29 electoral college votes), these include Pennsylvania (20), Ohio (18), Georgia (16), Michigan (16), North Carolina (15), Arizona (11), and Wisconsin (10). However, some US states, such as Pennsylvania and Wisconsin could not start processing and counting early votes until election day, so early final results here are less likely. Initial indications across some of these states suggest that the balance of votes might be close.
Not just the race for the White House, as Senate is key
In recent weeks, while polls suggested a Democrat win for the presidency and the House of Representatives, a much closer race has been for the control of the Senate. With Republicans defending a majority of 53 seats to 47 in the Senate, Democrat hopes for control have needed to flip a net of at least 3 Republican-held seats if Biden took the presidency, and 4 if Trump stayed in office (as the Vice-President can vote in the Senate in the event of a 50-50 tie). So far, Democrats have lost a seat in Alabama, and gained one in Colorado. Ultimately, should the Republicans keep control of the Senate, this would suggest more of an economic status quo where fiscal policy hopes might be more constrained that they might otherwise have been under a Democrat majority. As such, a ‘blue wave’ of infrastructure spending looks a little less likely at this time.
Initial reactions from Biden and Trump
Biden was first to speak to his supporters in the early hours, He called for “patience” and conceded that for a result it might be “maybe tomorrow morning maybe even longer“ and “it isn’t over until every vote is counted”. Meanwhile Trump has tweeted “We are up BIG but they are trying to STEAL the Election. We will never let them do it.” In a following address, Trump has remained confident saying “As far as I’m concerned we’ve already won this”. Clearly, neither candidate is looking to concede to the other at this early stage.
What does Brooks Macdonald think
Coming into this week’s US election, markets have had to contend with two key potential headwinds for risk appetite: first, there was the risk of an inconclusive early electoral result and with it likely legal challenges and worries of civil unrest; and second the risk of a corresponding delay to a long-awaited additional stimulus. With results so far pointing to a much tighter race than the polls had predicted in recent weeks, both of these risks remain a focus for investors. With no clear overall victory for either candidate at this stage, uncertainty looks to be the near-term reality for investors.
As you can see from the above, nothing is a given at this stage in terms of the election outcome and uncertainty in markets seems to be the forecast for the near term. I think it is fair to say, that when the outcome has been confirmed and gone through any legal challenges that may arise, that’s when markets will be more indicative of what impact the outcome will have.
As I say, it is imperative to remain focused on your long-term investment objectives, do not let short-term volatility, as we are seeing right now, distract you. It is important to remain invested to ensure you benefit from the recovery when it comes.
We will continue to provide you with updates on the ever-moving feast that is the U.S. election along with market commentary from leading investment houses to keep you abreast of the outlook for the future.
Please keep safe and healthy.
Carl Mitchell – Dip PFS
IFA and Paraplanner
04/11/2020
Equities fall sharply on broadening lockdowns
Please see below ‘Markets in a Minute’ update received from Brewin Dolphin yesterday evening. The article comments on a rise in Covid-19 cases leading to re-imposed Government restrictions and the world-wide effects of this on the markets.
Global equity markets suffered some of their worst falls since the start of the pandemic during the past week as Covid-19 infections continued to break new records.
In the last week of trading before the US elections today, numerous countries saw their highest daily infection rates and, worryingly, hospitalisations and deaths also increasing rapidly.
The data led to the widespread introduction of more severe containment measures across the UK and Europe. France and Germany announced full varying degrees of national lockdowns, with England set to join them from this Thursday.
As a consequence, optimism is fading for the fourth quarter, with the UK and eurozone economies likely to contract in the last three months of the year.
On the upside, there were reports of progress on Brexit, with talk of a compromise on fishing rights that would grant reduced access to EU boats in British waters. The news helped the pound strengthen against the dollar and the euro.
Last week’s markets performance*
• FTSE100: -4.82%
• S&P500: -5.63%
• Dow: -6.47%
• Nasdaq: -5.51%
• Dax: -8.61%
• Hang Seng: -3.25%
• Shanghai Composite: -1.63%
• Nikkei: -2.29%
Share markets rise despite announcement of lockdown in England
Markets rose on Monday despite the generally bad news flow over the weekend. The FTSE100 closed up by 1.4%, while equities across Europe also saw good gains. The benchmark EuroStoxx600 rose by 1.61%, the Dax gained 2% and the CAC40 finished 2.11% higher.
It may seem counterintuitive for markets to rise after so much bad news, but it reflects the fact that the market was anticipating a lockdown at some point, and investors prefer to have certainty – even if it is confirmation of something unwelcome such as a national lockdown – than live with uncertainty. There is an expression in the investment world that holds “sell the rumour, buy the fact” and that reflects precisely that investors are happier to put money to work in equities when they are sure about what events may hit the market, rather than making decisions based on guesswork.
Markets also rose in the US, on the last trading day before the election. The Dow closed up 1.60% and the S&P 500 was 1.23% higher at 3,310.24. The Nasdaq closed up by 0.42% at 10,957.61.
UBS mobility restrictiveness rating (scale of 1-10)
Furlough scheme extended
The government is extending the furlough scheme which pays up to 80% of wages for those unable to work during the new lockdown period.
The new lockdown will close pubs, restaurants and non-essential shops from Thursday until 2 December, and the government says it intends to return to the three-tier system when the lockdown ends, although the government has conceded that the full lockdown may have to be extended beyond 2 December if the “R” rate has not fallen sufficiently.
What is not clear is whether the furlough scheme will also be extended if that is the case.
US election
Despite Joe Biden being ahead in the polls and looking likely to take the White House and the Senate, the risk of a contested election this year is high for a couple reasons.
One is the fact that a very high proportion of votes will be mailed in. Donald Trump has repeatedly said that this increases the risk of fraud, which makes the loser more likely to contest the result.
Donald Trump has already objected to a Supreme Court decision to allow mail-in ballots in Pennsylvania to be counted up to three days after the election. In a tweet, he warned there could be violence on the streets as a result. This highlights how keen he is to dispute any close results.
Because these postal votes take longer to count, it is possible that Trump is ahead at the end of election day and claims victory prematurely. If the postal votes later change the result to a Biden victory, Trump would likely claim the comeback was down to fraud.
If either candidate wanted to contest the result, there is a lot of uncertainty and disagreement among legal experts over what would happen. The Supreme Court could get involved like it did in 2000, which was the last time the presidential election was contested, but some experts think the Supreme Court would choose not to this time, saying that the dispute is inherently political and not suitable for the court to decide. Biden or Trump could take their case to Congress, who under the constitution has the responsibility for counting Electoral College votes.
If the election ends up being contested, we’d likely see equity markets move lower. Back in 2000, it took more than five weeks to resolve, and the S&P 500 lost as much as 9.6% from election day before Al Gore conceded.
The US election appears to be more closely fought than the polls have previously indicated. Further changes in the markets are to be expected as we await the election result over the coming days. Please therefore check in again with us soon for market updates and relevant news.
Stay safe.
Chloe
04/11/2020
Brooks Macdonald – Weekly Market Commentary
Please see below this week’s market commentary update article from Brooks Macdonald, received 02/11/2020.
Weekly Market Commentary | Tuesday’s US election day key focus for markets this week
02 November 2020
Read detailed economic and market news from our in-house research team.
- Weekly Market Commentary
- COVID-19 updates
By Matthew Cady
Global equity markets suffer their worst week since March, as a coronavirus second wave threatens the pace of economic recovery
UK Prime Minister Boris Johnson signals a move back into lockdown for England from Thursday, but the Furlough Scheme is extended
The US election on Tuesday is the highlight for the week, but markets will also be watching policy decisions due from US and UK central banks
Global equity markets suffer their worst week since March, as a coronavirus second wave threatens the pace of economic recovery
Global equity markets fell -1.2% on Friday, finishing the week down -5.3%, and suffering their worst week since March (MSCI ACWI net total return in US dollar currency terms, MSCI: please see important information). Gripping the markets’ risk-off mood was concern about the economic impact from a rising second wave of coronavirus infections. Ending the month on a sombre note, the US set a record for daily new cases on Friday with almost 100,000 people testing positive according to the US CDC1, and a new one-day country world record for the pandemic. Globally, the US continues to lead with over nine million cases2, but COVID-19 is seeing a resurgence across other countries, including UK and Continental Europe.
UK Prime Minister Boris Johnson signals a move back into lockdown for England from Thursday, but the Furlough Scheme is extended
Over the weekend, England announced a return to a national lockdown, joining similar measures taken in France and Germany in recent days. England will start a new country-wide lockdown on 5 November, lasting four weeks until 2 December, although lockdown 2.0 will be somewhat different with schools and universities remaining open. The UK Prime Minister also indicated that the Furlough Scheme, which was due to be replaced at the end of October, would instead be extended at 80% of hours not worked, and would last for the period of the new lockdown.
The US election on Tuesday is the highlight for the week, but markets will also be watching policy decisions due from US and UK central banks
This week, the long wait is over. Tuesday 3 November is US election day, but that date is less significant this year, as record numbers of US citizens have already chosen to vote early either in person or by post. According to the US Elections Project as of 1 November, some 92 million Americans (equivalent to 66.8% of the total votes counted in the 2016 US election) have already cast their ballots3. According to Reuters, only 47 million votes came before Election Day in 20164. In addition, some states are allowing the counting of late postal ballots, for example, by three days and nine days after election day respectively in the case of swing states Pennsylvania and North Carolina. Normally, a state requires ballots to arrive on election day in order to count but, following legal rulings, this time for some states it means that ballots need only be postmarked by election day or the day before and can still be counted if they arrive within the allotted time after election day. This suggests that for a very close-run result in some states, postal votes might be the deciding factor and counting those in the days following 3 November could well leave markets unsettled.
While the US election is the main event of the week, markets will still have plenty on their plate on the data front. The week starts with final October purchasing manager surveys for manufacturing around the world, before getting services and composite surveys later in the week. The week will end with US October payrolls and unemployment data on Friday, and while consensus is looking for another fall in the US unemployment rate to 7.7% in October (from 7.9% in September5), the focus will be on any clues about the pace of change behind the headlines. If that wasn’t enough, it’s another big week for corporate earnings, with a host of companies reporting Q3 results through the week including AstraZeneca, the company behind one of the hoped-for COVID-19 vaccines, due on Thursday. Finally, UK-EU trade discussions continue this week, and news here could surprise either way. With markets having been on the back foot in recent sessions, it means the pressure-release valve button for this week is back with the US Federal Reserve who will announce their latest policy decisions this week on Thursday. Closer to home, the UK Bank of England’s Monetary Policy Committee also announces its latest policy decisions on Thursday and following the latest UK lockdown measures and extension to the Furlough Scheme, markets will be expecting policy coordination to be delivered.
A useful article from Brooks Macdonald, focusing on the UK national lockdown and the US election. The US is one of the most influential markets globally, what happens next from a political point of view is important to the global economy.
Please continue to check back for our regular blog posts and updates.
Charlotte Ennis
03/11/2020
Blackfinch Group Monday Market Update
Please see below for the latest Blackfinch Group Monday Market Update received by us today 02/11/2020:
UK COMMENTARY
- Infection rates continued to climb, with talk of a second national lockdown becoming more prevalent towards the end of the week
- According to the Confederation of British Industry, retail sales fell in the year to October. The group surveyed 116 firms, of which 54 were retailers, and highlighted a loss of momentum from September
- The Bank of England (BoE) entered consultation with UK banks about the potential for allowing them to resume paying dividends
- Data from The British Retail Consortium showed that prices in UK shops fell by 1.2% in October, after falling 3.2% in September. Prices for non-food items also fell 2.7% month on month
- Net mortgage borrowing increased to £4.8 bn in September, from £3.0 bn in August, according to the Bank of England. Mortgage approvals for house purchases reached their highest level since September 2007, at 91,500
US COMMENTARY
- House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued to be unable to reach an agreement on a stimulus package
- Latest gross domestic product (GDP) figures showed that the US economy grew by 33.1% in the third quarter, following a fall of 31.4% in the second quarter. Expectations had been for an increase of 32%
- In the week to 24th October, new jobless claims fell to 751,000, better than forecasts of 770,000
- Daily new infection cases reached record highs, with over 100,000 infections reported on 30th October
- New home sales fell short of consensus, with 959,000 sales reported in September, below expectations for 1.03 bn homes to have been built
EUROPE COMMENTARY
- France, Spain, Germany and Ireland all imposed further restrictions on movement in a bid to slow rising infection rates
- The European Central Bank left rates unchanged. Head of the bank Christine Lagarde suggested there was ‘little doubt’ that the bank would act in December to loosen monetary policy further
- GDP across the region increased by 12.7% in the third quarter, ahead of the 9.4% growth expected. France, Spain, Germany and Italy all posted forecast-beating figures
ASIA COMMENTARY
- South Korea GDP grew 1.9% in the third quarter as compared to the previous quarter
- The Bank of Japan made no changes to its monetary policy settings, as expected. However, it did trim its growth forecasts to reflect sluggish service spending through the summer months
COVID-19 COMMENTARY
- The UK’s Medicines and Healthcare Products Regulatory Agency announced that it has started accelerated reviews of the vaccines in development by both Astrazeneca and Pfizer. This is in the hope of enabling the UK to approve the first potential jab as quickly as possible
These articles provide concise well-informed views that cover the whole of the market and are useful to maintain your up to date view of the markets globally.
Please keep reading our blogs regularly to give yourself a holistic and up to date view of the markets.
Keep safe and well,
Paul Green
02/11/2020
A.J. Bell Article – The factors that could make value outperform growth and tech
Please see below an article from A.J. Bell which was received over the weekend, which provides their insight into investment opportunities:
As you can see from the above article, although value stocks can provide some stability, the idea is really to invest in growth stocks from an early stage to reap the rewards. With this in mind, it is important now more than ever, to remain invested and focus on your long-term investment objectives and whilst markets are low, now is an opportune moment to invest additional funds into the market and get in at a lower price.
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
02/11/2020
Invesco Article – Volatility is your friend – valuation opportunities
Please see below an article received late yesterday afternoon from Invesco which provides their insight into volatility and investment opportunities:
Distorted market valuations mask compelling opportunities
It is worth remembering that valuations tend to be distorted in a post-recession world, but while economies recover from the COVID-19-related ‘sudden stop’, there are opportunities to be found.
As you can see from the above article, investment opportunities are still out there for investors, but it remains important to have a long-term (minimum 5 years) view and a diversified portfolio, which is spread across a number of regions and sectors in order to benefit from these opportunities. The longer the investment term, the better.
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
30/10/2020
Election Night 2020: Champagne and Cheers or Anxiety and Jeers
Please see below intriguing insight into US Government affairs published by Invesco. The commentary provides predictions relating to the ‘pivotal’ states and explains potential scenarios should the validity of the electoral result be challenged after the 3rd of November.
In what many voters feel like has been a never-ending presidential campaign cycle, November 3 is finally close enough to touch. But will Election Day 2020 provide closure for a restless electorate?
As President Trump and Vice President Biden barnstorm a handful of battleground states the intricacies and mechanics of how a candidate becomes president are coming into light and all eyes are on the Electoral College. Consisting of 538 electors representing all fifty states and Washington D.C. and roughly allocated by population, the Electoral College, not the popular vote, ultimately decides U.S. presidential elections. To win, a candidate must secure an absolute majority – 270 or more electoral votes. Since most states – with the exceptions of Nebraska and Maine – assign electoral votes on a winner-take-all model based on state-wide vote totals, a small percentage of voters in key states can play a deciding role in the overall election outcome. Former Secretary Clinton learned this painful lesson when she captured the popular vote but fell short of the electoral vote four years ago.
In these final weeks of the campaign, candidates will continue to crisscross the country as they cobble together puzzle pieces of electoral math. With so few states actually in play (Florida, Michigan, Pennsylvania, Georgia, Ohio, Wisconsin, Arizona, Nevada, Minnesota, North Carolina, New Hampshire), political experts have started to take a deeper look at chaos theories and “what if” scenarios. What if results are contested? Could there be recounts, lawsuits or both? Will state legislatures have to get involved?
States in play
Political talking heads have focused on Bush v. Gore in 2000 as the precedent for presidential election chaos. That dispute, untimely decided by the Supreme Court, halted an ongoing recount and determined that President George W. Bush had won Florida by 537 votes. That victory meant that Bush won all 25 of Florida’s electors giving him a total of 271 votes in the Electoral College and, with that narrow majority, the presidency. Some experts have forecasted that several states in 2020 could see similar recount and courtroom drama leading all the way to the Supreme Court in deciding whether Trump wins a second term or Biden claims victory. Their predictions are based on the craziness of 2020: the pandemic, a record number of mail-in ballots, the polarization of America and President Trump’s characterization of the voting process.
However, famed Republican election lawyer Benjamin Ginsberg recently put the odds of the 2020 presidential election ending up in a legal battle that sprawls into January at just one percent citing more signs pointing to a smooth transition than a repeat of 2000. Keep in mind that only three of the 57 previous presidential elections have been contested.
But is history relevant in modern politics? Here are several variables to watch for to determine if this election will be decided within hours, weeks or months of the polls closing.
Vote Counting
Democrats have embraced vote-by-mail while President Trump has lambasted it as fraudulent despite casting his own ballot by mail. History will take a very close look at the encouragement – and discouragement – of mail-in and absentee voting on the results of the election both in terms of the presidential outcome but also the impact on down-ballot candidates.
Election Day and subsequent weeks could see voting result fluctuations as in-person votes are tabulated and mail-in and absentee ballots are counted. As of October 21, the US Elections Project counted 84.7 million absentee ballots that had been requested and 44 million people who had already voted. There will be confusion on election night as both political parties and news outlets grapple with reporting in-person votes versus absentee or mail-in as different states have different rules on when votes can be counted. Also, there are questions as to when mail-in or absentee votes are valid? Here are three different categories of how and when states can count early votes and they will be important to understand the differences as the results come in:
22 state election authorities and the District of Columbia start counting when the ballot is received. Among this group, Arizona, Georgia, Minnesota and Nevada are considered the most pivotal for the presidential election and could foreshadow a good night for President Trump or Vice President Biden. If Biden were to flip the red state of Georgia to blue and secure 16 electoral votes, it could prove be to be a tough road for Trump. Similarly, in 2016, Trump narrowly lost Minnesota – a state that has not voted for a Republican president since 1972. If the results look favorable for Trump there, it could not only put 16 critical electoral votes in his tally but foreshadow that the famous “Blue Wall” (Michigan, Wisconsin, and Minnesota) has crumbled. Arizona’s ability to count as the votes are received prior to November 3 could permit some early forecasting on whether Trump recaptures the Grand Canyon State’s 11 electoral votes or if Biden is well on his way to becoming the 46th President.
Before Election Day:
25 state election authorities can tabulate votes at a defined date by state law. Among this group, Florida, Iowa, Michigan, New Hampshire, North Carolina and Ohio are considered the most critical to election outcomes. But this group of states range in when counting is permitted. On one end there is Florida which started its tabulation on September 24 and on the other end is Michigan which starts counting 10 hours before Election Day. The early tabulation will allow states to report out November 3 numbers that could either spell doom and gloom or early moments of celebration for either party.
President Trump’s path to victory will be severely truncated if he cannot match his 2016 victories in Florida, Ohio, Michigan and North Carolina. Similarly, any victory by Biden in these same states will be a sign of optimism for Democrats. The ability for these states to count early should remove weeks of suspense as they will have a head start on tabulating votes while also counting in-person voting which is expected to lean Republican. Another important element to watch in Florida is that the state does not allow ballots to be counted if they are received after Election Day which should reduce election result delays.
On Election Day:
Four state election authorities can tabulate votes on the date of the election with Wisconsin and Pennsylvania by far the most important to determining election outcomes. President Trump shocked the political establishment in 2016 when he won both states and neither party is leaving anything on the table in 2020. Both Republicans and Democrats will be closely watching election night to see results in these battleground states. Wisconsin officials have said they expect to have their results completed the day after the election. The state has also permitted county clerks to verify signatures on the outside of the ballots early which should reduce dayof vote counting (and suspense) and reduce the number of questionable ballots.
What does this all mean? The ability for critical bellwether states to either tabulate ballots as they come in or on a certain date before November 3rd does provide some certainty that election results will come sooner rather than later. It is estimated that 40 to 50 percent of the projected 150 million votes could be cast by mail. Experts largely agree that early voting will favor Democrats and Election Day in-person voting will favor Republicans. Depending on when states begin counting mail-in votes and therefore which votes – mail-in or in person – are reported first, there could be several “blue or red shifts.” This could create the impression that one state is headed blue or red based on that state’s ballot counting requirements. The “blue and red” shifts may frustrate the candidates and create the appearance of “fraud” or gamesmanship but they are simply part of the process that will allow the results of the election to be made public faster.
Electoral College
With only a handful of truly competitive states, the path to either candidate securing the 270 electoral votes needed for victory hinges on election returns in Florida, Michigan, Pennsylvania, Georgia, Ohio, Wisconsin, Arizona, Nevada, and Minnesota. Contested or uncertain results in any of these states, as occurred in Florida in 2000, could prevent either candidate from reaching the 270-vote threshold. President Trump and some experts have raised concerns that delays in finalizing election results could run into the December 8th safe harbor deadline. This deadline, set by federal law, is the last day when states can appoint electors without interference from Congress.
Electors are set to cast their votes on December 14th. If a state’s results remain contested and without a clear winner past December 8th, there is no clear remedy. One option would be for the state’s legislature to name its own slate of electors regardless of the results of the state-wide vote. In states where one party controls the legislature and a different party holds the governor’s office, this could result in competing slates of electors being sent to Congress. In either case, a state government overriding the popular vote could lead to claims of a “stolen election” and push the losing party to not accept the results. Despite the possibility of these worse case scenarios, it is important to note that no state legislature has ever appointed a slate of electors supporting a candidate who lost that state’s popular vote, and this remains unlikely in 2020.
State Election Rules and Law
If election results in one or several states are in question this November, the vast majority of states have basic election safeguards already in place to create an orderly process to determine the legal electoral outcome.
As of October 2020, twenty states have a statutory provision allowing for an automatic recount of votes if the margin between the top two candidates is within certain parameters. Forty-three states have a statutory provision allowing for a requested recount of votes. It is highly unlikely that statutory requirements for a mandatory or requested recount will be triggered since it is improbable that those states’ results will be so narrow and are relevant to the Electoral College outcome that the country will see widespread vote recanvassing. The biggest hurdle for a contested election will be a few battleground states that have protracted election recounts that could see their results questioned.
The bottom line is that states have been preparing for a highly competitive presidential race and will be certain to ensure the results are accurate and timely. The rules of the road are clear in disputing election (allegations of fraud) results and requesting recounts and all eyes will be on those states if their results will determine the winner. While it could be a bumpy road over the next several weeks, it’s unlikely Americans will have to go too long before they know who will serve as president for the next four years.
How the US election result influences market performance is also to be seen. Please check in again with us soon for further relevant updates and articles.
Stay safe.
Chloe
29/10/2020
Market Update and Guidance
Market Update and Guidance – 29/10/2020
As we deal with the health and economic impact of the second wave of the virus in the UK and Europe, markets have hit another patch of turbulence. We have seen heightened volatility over the last few days.
Why do we have this level of volatility?
The obvious answer is the global pandemic and the impact on our economies around the world. In addition to this we have the US election and Brexit too to name just a few issues.
The US election has gridlocked the political system in the States and as a result badly needed additional fiscal support has not been forthcoming. If we get a ‘Blue Wave’ for the Democrats and they are fully in control this gridlock could be resolved fairly quickly and fiscal support could be put in place.
Brexit negotiations rumble on and we could do with a positive outcome. J. P. Morgan’s base case is that we will get a last-minute fudged deal but there is still a risk of a ‘No Deal’ Brexit.
Volatility could continue with further legs down even as economies and markets recover. Given time markets and funds will recover.
What is the outlook?
The vaccine (or vaccines) are a key issue. The consensus view appears to be that we will have a vaccine late this year or early 2021. This will be a game changer. Even if we can only protect our Health Workers and the vulnerable initially this should give consumers confidence to return to normal behaviour.
By the end of 2020 we should know who the next US President is, understand our Brexit position and hopefully have vaccines that are starting to be rolled out.
Are there any bright spots?
China and North Asia generally are doing well. In particular the data coming out of China is really good and they appear to have recovered economically and are growing. This could have a positive impact not just in the region but globally.
Some sectors have done well too, for example Technology. We are also seeing more intertest in ‘Green Energy’ as the world starts to grapple with climate change.
Vaccine development is progressing at a pace too.
What might help?
More support from Central Banks such as the Bank of England, the ECB, and the Federal Reserve. Generally, they look supportive and able to accommodate more help. The IMF recently indicated that more support should be forthcoming from Central Banks.
Policy support from governments globally will help too. We need to spend on infrastructure projects and focus on keeping people in work and getting back to work with training and apprenticeships etc.
A weaker dollar would be useful helping Emerging Markets trade and having a positive impact on global trade too.
As an investor what should I do now?
Maintain the status quo and stay invested in real growth assets. If you are funding pensions and investments keep on funding. Generally, asset values are low now and should show good returns over the long term.
If you have spare capital now is a good time to invest too if you have the risk appetite. Buying assets at the right price is the key determinant of long-term investment returns.
Don’t try and time the market, you need time in the market.
Summary
The quote ‘The darkest hour is just before the dawn’ seems appropriate. Said to emphasise that things often seem at their worst just before they get better. The English theologian and historian Thomas Fuller appears to be the first person to commit the notion that ‘the darkest hour is just before the dawn’ to print.
We don’t know how long this ‘hour’ will be, but progress is being made.
Just be patient, we should be on the way to a brighter future and hopefully with the aid of vaccines our behaviours will become more normal and economies and markets will recover as our activities increase and life returns to normal, a new normal?
Steve Speed
29/10/2020
Brooks Macdonald – Daily Investment Bulletin
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