Team No Comments

US ELECTION

Please see below update received from Blackfinch Group yesterday afternoon which provides an insight into the ongoing race to the White House and the consequences of US events on the markets.


CONTINUED MONITORING OF THE PORTFOLIOS
At Blackfinch Asset Management, we did not play politics with the portfolios and stuck closely with our strategic asset allocation. Tactical overlays were driven by our views of global markets, without placing a “bet” on who would win the White House. As such, the portfolios are robust enough to benefit from either a Trump or Biden victory. Clearly from the polls, it’s extremely difficult to predict outcomes of such huge events, and furthermore the reaction of global markets when outcomes become more certain. 

The United States is a large, diverse and wealthy nation, and our asset allocations to the market reflect this. However, our tactical positioning is under continuous review. We will endeavour to update you on portfolio activity as the political backdrop evolves. As it stands, we do not envisage any changes to the portfolios under a Biden presidency and the portfolios are well positioned in this regard. 

THE PRESIDENTIAL RESULT
The presidential election dust is settling in the United States and it points to there being a new president in the White House. Yet, over 24 hours on, this is by no means guaranteed. What we do know, at the very least, is that the polls predicting a landslide victory for Biden were wrong, and it was a much more closely fought election than they made out. Question marks will remain as to how much the polls can be relied upon in such crucial events like a presidential election when all is said and done.

As it stands on the morning of 5th November, Biden has gathered 264 electoral votes out of the required 270 needed for a majority victory. He is ahead in Nevada as votes continue to be counted, a state that would provide the remaining six electoral college votes to win the presidency. Biden won critical states in Arizona, Wisconsin and Michigan, states that Hillary Clinton failed to win in 2016 and which then, ultimately, created a path for Trump to take office in the White House. Trump, this time round, has already gained more votes than he did in total in 2016, boosted by a greater turn out, and retained key battleground states in Florida and Texas. Trump could take all remaining states outside of Nevada and the United States will still have a new president in Joe Biden.

It is doubtful that events will be smooth sailing from this point, with Trump already threatening to challenge the result in the Supreme Court. This could lead to weeks of political wrangling as the election is extended into a rare legal battle. Any stimulus bill to cushion the longstanding effects of the ongoing pandemic would likely be pushed out to 2021 as Congress deals with the ramifications of a challenge on the presidency. 

MARKET OUTLOOK
Markets, at least in the short-term, are ignoring the risks of a delayed stimulus package and a potentially uncertain political backdrop as the Republicans look set to retain control of the Senate. A Senate controlled by the Republicans with a Democratic president would quash any “Blue Wave” trade whereby a shift towards fiscal over that of monetary policy would lead to much higher government spending, higher yields and a return of outperformance from cyclical sectors. A Republican-controlled Senate also reduces the likelihood of increased regulation and anti-trust challenges of the Big Tech companies such as Google, Facebook and Amazon. 

Equities rallied yesterday, particularly the tech-heavy NASDAQ, while long Treasury yields fell dramatically as a rotation out of the Blue Wave trade developed when a Biden/Republican combination in the White House and Senate looked likely. Although uncertainty remains, this political combination in the White House and the Senate continues to be the greatest likelihood of outcomes from the election. The political rhetoric from the campaign trail should be dialled down now, resulting in a more centrist presidential administration than there perhaps otherwise would have been if the Democrats gained control of the Senate. Biden may reverse many of the executive orders issued by Trump during his four years in office, but overturning legislation with a Republican Senate will be much more challenging. Political gridlock would ensue, and that should be good for markets and volatility.

Although Biden appears to be edging closer to victory, we do not know how long it will take before the election result is revealed, as turbulence surrounding vote-counting continues. Please check in again with us soon for further updates.

Stay safe.

Chloe

06/11/2020

Team No Comments

Invesco – Emerging Markets – it’s all about picking and choosing

Please see latest emerging markets article below from Invesco – received 05/11/2020

Emerging markets beyond COVID-19: all about picking and choosing

02 October 2020

Arnab Das – Global Market Strategist

In the context of slow global growth, we believe investors can benefit from reducing home bias in favour of emerging market (EM) exposures. However, EM investing is much more than simply buying or selling the market. 

“Despite not slowing the virus, many EMs are reopening national economies and opting for regional lockdowns.”

Arnab Das, Global Market Strategist

In the context of slow global growth, low inflation and ultra-low yields (at least for some time to come), we believe investors can benefit from reducing home bias in favour of emerging market (EM) exposures. However, EM investing is much more than simply buying or selling the market.

Re-assessing emerging markets in the world beyond COVID-19

Post-lockdown re-openings, secondary outbreaks and rising global tensions raise crucial questions about the cycle and the long term, arguably more in EM than other asset classes:

1. Boost or cut EM exposure? Should investors seek higher growth hopes, inflation risks and hence yields in EM, expecting the global economy to recover sustainably, with low inflation, loose fiscal and monetary policies and a supportive financial environment? Or reduce EM exposure in fear of faltering recovery, rising inflation, higher trade/investment barriers, or all of the above?

2.Treat EM as one or pick and choose among countries and asset classes across the EM complex, including local currency, hard currency debt, or equity – as opposed to shifting index exposures?

We expect global financial conditions to continue to support EMs despite clear and present dangers, which we believe are reflected in higher risk premiums in many EMs relative both to developed markets (DM) at present and relative to EM history.

Easy macro policies, financial conditions, low inflation globally should support a gradual global recovery and ‘risky’ asset classes including EM, despite COVID-19 challenges.

We also believe investors should emphasize selectivity in EMs over time. Over the longer term, we expect EMs to reform domestic and international policies, causing growth models as well as macro and corporate performance to diverge. Investors should therefore be able to boost returns and may even be able to lower volatility via selective country and asset-class weightings.

The COVID-19 Great Compression…

The world suffered a “Great Compression” during the first half of 2020 as governments adopted lockdowns to protect public health, sacrificing private income and wealth. Deliberately compressing activity is very different than conventional recessions, in which monetary policy is tightened to stop inflation; or depressions, in which policy is too tight, causing financial stress or crises and multi-year downturn.

Almost regardless of economic structure – led by manufacturing, services, domestic demand or international trade, or size of government, the tighter the COVID-19 lockdown, the steeper the fall in GDP (Fig. 1, left chart).

Fig 1. A Great Compression: COVID-19 lockdown stringency closely related to GDP performance

GDP growth, QoQ vs. quarterly lockdown stringency averages. Left-hand side, Q1. Right-hand side, Q2. Source: Lockdown Stringency Index, Blavatnik School of Government, Oxford University. National statistical agencies, IMF, Invesco. Data as at various release dates during 1H2020. NB: Excluding China from the Q2 sample raises the R-squared tightness of fit to 0.68.

This downturn was much faster, deeper and wider than economic downturns, which are more gradual and tend to respond to monetary or fiscal easing more directly; wars in which productive capacity is destroyed and must be rebuilt; or natural disasters, which tend to be much more geographically concentrated. Hence, mapping the COVID compression, the current rebound and recovery ahead requires factoring in the conceptual similarities in lockdowns and practical differences in reopening.

Despite the shared compression, we therefore expect much greater differentiation as economies emerge from lockdowns, given vast differences in economic characteristics, macro policies and effectiveness in containing COVID-19. China, first into the pandemic and lockdown in Q1 and first to rebound in Q2, is weakening the global link between lockdown intensity and GDP (Fig. 1, right chart).

… is pushing EMs to re-open, despite rising caseloads and deaths due to policy limitations –

Despite not slowing the virus, many EMs are reopening national economies and opting for regional lockdowns. These policies are not so different from China and DMs with effective lockdowns and regional outbreaks; or the US and UK, which are re-opening generally but locking down regionally, because of ineffective national lockdowns.

We reckon most EMs and DMs will not reimpose economy-wide lockdowns but continue with regional lockdowns unless they face severe second waves.

Fig 2. Pandemic performance varies widely across DM and EM economies

Officially confirmed infections, rolling seven-day average. Source: Johns Hopkins Coronavirus Resource Center, Invesco. Data as at 3 August 2020. NB: Y-axis is on a log scale, base 10; 10-fold increases in caseloads occupy the same distance, to help in visualizing the exponential “reproductive rate” of the novel coronavirus behind COVID-19.

But there the similarities end: many EMs lack adequate space for social distancing; public hospitalization and treatment; and public borrowing to compensate for private income lost during lockdowns.

These challenges threaten DMs but are more severe in EMs – another reason the bar will be high for further nationwide lockdowns, reducing the chances of a double-dip economic compression and pressures on EM currency and asset valuations.

After all, its lockdowns and fear of the virus that have hit economies hardest, much more than the direct impact of illnesses and fatalities.

Re-opening rebound set to give way to a gradual, highly differentiated recovery

As lockdowns are released, we expect a re-opening rebound in many countries during Q2-3 as pent-up supply and demand are released. But afterward, we expect more gradual and differentiated recoveries as vast variations in fiscal space, in economic characteristics and in demographic exposure to the virus all come into play.

For example, fiscal support varies significantly across the G20 group of largest EM and DM economies, as well as from fiscal responses to the Global Financial Crisis – but is far larger as a share of global GDP today than in 2009.

These variations amid strong global fiscal support give us confidence that country performance will be differentiated amid global recovery.

Fig 3: 2020 fiscal support varies widely by country and compared to the 2009 Global Financial Crisis

Percent share of 2009, 2020 national GDP – left; percent share of global GDP in 2009, 2020 – right. Source: IMF Policy Tracker, IMF GDP Data, Atlantic Council, Invesco. Calculations based on data at various national release and announcement dates, and Atlantic Council as at 26 July 2020. 2009 based on IMF, Eurostat and G20 data. NB: Calculations exclude deferrals and guarantees; include discretionary fiscal support programs (aside from “automatic stabilizers”), announced and implemented programs.

Evolving international system points to gains from diversification and selectivity

During the heyday of globalization 1989-2009, EM investment was about capital gains generated by the convergence of high EM risk premiums to DM levels thanks to economic and financial integration.

The GFC slowed both globalization and global growth, and EM investment shifted to yield seeking and loss avoidance – essentially a carry play. Now, as international tensions rise, we expect EM countries to continue to adopt different regulatory, technological and policy frameworks, trade/investment partners and ultimately varied growth models. Therefore, the cyclical divergence now unfolding should lead to sustained diversity in economic performance.

This is a new world order in which, in the context of slow global growth and inflation and ultra-low yields (at least for some time to come), investors can benefit from reducing home bias in favour of EM exposures.

And capitalizing on diverging EM policy choices and performance would be enhanced by actively picking and choosing EM regions, countries, currencies, sovereign and corporate debt and equity to overweight and underweight.

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

Charlotte Ennis

05/11/2020

Team No Comments

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

Team No Comments

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

Team No Comments

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

Team No Comments

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

Team No Comments

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

Team No Comments

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

Team No Comments

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