Investments Update – November 2020: A Memorable Month for Markets

England is only part-way through its second lockdown and many people around the world continue to live under temporary rules designed to help stop the spread of COVID-19. In the US, cases are rising rapidly, and Europe’s second wave has been spreading much quicker than anticipated.

However, when it comes to 2020 as a whole, markets will fondly remember the 9th November as the day that the Pfizer and BioNTech COVID-19 vaccine stole the headlines.

A Shot in the Arm for Markets

The vaccine, which is meant to be over 90% effective, was not just welcomed – it was celebrated. A ‘relief rally’ was visible across global stock markets, with values rocketing upwards from the gains already made following the news that Joe Biden appeared to have won the US presidential election. The UK stock market, as just one example, enjoyed its strongest gains since March, a month that many would like to forget.

The optimism surrounding the Pfizer vaccine, and the Moderna vaccine that hit international headlines shortly after, combined with the news that other vaccines are close to the finish line, has led to a noticeable shift in markets. Investors around the world have been busy buying up equities, with energy companies gaining popularity again while technology firms have been slipping off their 2020 pedestal. Travel and leisure stocks have been rising in value too, as people start to believe that the days of ‘essential-only travel’, ‘social bubbles’ and quarantine will soon be just another page in the history books.

Markets are likely to be boosted further by other successful vaccine trials. It is encouraging, therefore, that the University of Oxford’s vaccine is near the final hurdle too, particularly as it is widely believed to be an easier and more cost-effective alternative to Pfizer’s offering. However, having any effective vaccine in place would allow markets to – once again – consider investing based on factors other than those related to COVID-19. It would also enable ‘normal’ life as we all know it to slowly resume.

The UK Economy, Biden and Brexit

In another piece of positive November news, the Office for National Statistics reported that the UK economy moved out of recession in the period from July to September, with growth of 15.5% achieved. This still doesn’t make up for the economic damage caused by the UK’s first lockdown, but even small steps at this stage are encouraging.

Despite this, the black cloud of a UK-EU trade deal is no longer on the distant horizon – it’s directly overhead, and the markets, always afraid of uncertainty, are yet again turning their attention towards it. Negotiators from both sides are still meeting, as agreeing a mutually beneficial deal is in the best interests of both parties, but time is quickly running out.

President-elect Joe Biden has already made his anti-Brexit stance clear, alongside his determination to protect the Good Friday Agreement. In addition to this, trade talks between the US and UK are unlikely to get into full swing until the end of January, when the new president is firmly seated in the White House. In contrast to the state of affairs we saw with President Trump, there has been no promise from Biden that he will move mountains to ensure a UK-US trade deal is agreed.

That said, the US and UK are likely to find common ground on environmental and defence issues. When the historically positive relationship between the two nations is also considered, a signed trade deal still seems highly probable. Similarly, markets and investors are taking comfort from the fact that the ongoing trade war between the US and China should take a more peaceful route forward now that a new US president is ready and waiting in the wings.