Please find below our Investment Market Update as at 23rd October 2020.
Blue Sky Investment Market Update
It’s pantomime season!
Considering the potential short-term headwinds, particularly with regards to the US Presidential elections in just over a week’s time, equity prices remain fairly stable. Last night we had the final US Presidential debate. The markets were unmoved.
It appears as though the race is tightening as the Republicans take to social media with real gusto. As always, sorting out the truth amidst the fake news is the difficulty for Americans. CNN reported that there were 66 false claims in just two days over last weekend from the Trump camp. Personally, I feel like pantomime season has come early! At least though, last night was a calmer, albeit tense debate, with both parties following the new agreed rules on debating, in accordance with the bipartisan commission.
Does it really matter to the markets who wins?
Well, it will in the short-term, according to Sanjay from LGT Vestra who commented in our webinar held yesterday, “it is likely that the dollar will swing and this will inform the positioning of assets. It is expected that if Biden gets in, the dollar may weaken which would favour overseas assets. If Trump gets in the dollar could strengthen which would favour US stocks”.
Ahead of the election, we have made a few switches across our internally managed portfolios to ensure we have greater diversity to cover all bases and along with our investment partners, we will continue to adjust our strategies to embrace change.
A sustainable view
Phoebe Stone from LGT Vestra made it very clear what she hopes for when it comes to investment in the Sustainable space. It is expected that the Biden regime will be far more supportive than the incumbent party.
Last night, in the discussion about climate change and environmental policy, Trump asked Biden if he would close down the oil industry. Biden replied: “I would transition from the oil industry, yes.”
“That’s a big statement” Trump said. “It is a big statement,” Biden agreed. “The oil industry pollutes significantly… it has to be replaced by renewable energy over time.”
Trump was of course looking to win favour in key battleground states which are reliant on the oil and gas sectors.
What else is going on in the world?
Besides the US Presidential election, making the headlines this morning is the UK completing its first large post-Brexit deal after signing an agreement with Japan, that will take effect from January 1st 2021.
It was reported in the Ft.coms website today that both sides regard the agreement as a potential stepping stone to UK membership of the Trans-Pacific Partnership, a regional pact that includes Australia, New Zealand and Canada as well as Vietnam, Malaysia and other countries around the Pacific Rim.
Cheap assets for foreign investors
A local twist here; Bournemouth based McCarthy and Stone are the latest company to attract the interest of foreign investment as companies seek to buy discounted assets. The McCarthy and Stone share price rose today by some 40% on news that a company called Lone Star from the US has made a bid.
Good news for banks
In a difficult year for banks, it would appear that they are in a healthier state than many believed. Barclays reports that the revenue from trading the markets has surged, offsetting the uncertainty. Furthermore, the provision for bad loans has fallen significantly in the third quarter as the initial shock from the pandemic subsided. This news helped support the rise in the FTSE 100 today.
UK retail sales improve
In the UK retail space, sales in September were 4.7% above the level in the same month last year which is encouraging – purchases at furniture and gardening stores leading the way. This was the fastest pace of growth since April 2019 with spending being 5.5% over the level immediately before the pandemic in February.
Consumer confidence wanes in October though
As Covid cases surge once again, it’s no surprise that businesses feel the sharp end in weakening consumer confidence. A survey run by the Office of National Statistics with circa 6,000 businesses, found that more companies are reporting a decreased turnover at the beginning of October. This is in contrast to improving turnover since May this year.
On the Covid note…
My wife Sandra was yesterday diagnosed with a positive Covid test. She’s okay and, besides having no taste or smell with the additional symptoms of aching all over, she says it is similar to a cold with interest! The boys in the Neild household went for our tests last night and, interestingly, it was very busy at the testing site! Fingers crossed Ashley, Daniel and I get negative results in the next day or so. However, regardless, we will be self-isolating but we are looking forward to a good weekend of sport on TV… poor Sandra, in more ways than one!
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.