Market Overview – 17/11/2020

Even before the dust has settled on the US election (outcome still disputed by Donald Trump) another piece of news moved stock markets substantially last week. On Monday, Pfizer announced that the vaccine it was jointly developing with BioNTech had shown 90% effectiveness in trials.

Equity markets soared on the news, with particular emphasis on the share prices of companies currently impacted by lockdown restrictions. By contrast, “stay at home” beneficiaries such as the big US technology and streaming names saw profit taking. The UK was the one of the best-performing major markets, rising by 7%. The US lagged, advancing by 2%, reflecting the more growth and tech-focused composition of its index. The question is whether this rotation continues. In the short-term, Covid cases continue to rise sharply in the US. With no fresh stimulus package in place yet, this will negatively impact on economic data in Q4 as cities increase restrictions on movement. More optimistically, however, if the vaccine(s) are successfully rolled out in the early/ middle part of next year, things could be looking a lot better for the second half of 2021. Markets are already looking ahead to this prospect.

This weekend saw the signing of a major deal involving fifteen Asian economies to create the largest trade alliance in the world. Covering a third of the global population, it sets the foundation for closer co-operation between major players in the region. For the first time, China, Japan, and South Korea will be in a single trade agreement, hugely symbolic at a time when the US has adopted an “America first” foreign policy over the past four years. While many of the Asian economies have historically focused on delivering exports to the rest of the world, this agreement creates a large internal market that will deliver benefits to the member nations. This looks like another challenge for President-elect Biden to consider as he frames his vision for the next four years.