Market Overview – 01/12/2020

As November closes out, it looks as though the month will have delivered some of the best returns ever from equities. At the time of writing, the FTSE World Index is up over 13%, with most major markets generating double digit returns. For many, sharply rising stock markets may seem to be completely disconnected from the continuing increase in coronavirus cases and the health and economic hardship that has resulted. However, the recent positive news on vaccines has given hope that some semblance of normality will be restored by the middle or late next year. Markets are forward looking and are anticipating better news ahead. Politically, Donald Trump’s attempts to overturn the Biden victory are fading. The latter’s appointment of former Chair of the Federal Reserve, Janet Yellen, as Treasury Secretary has been well received and bodes well for good co-operation between the government and the central bank. Closer to home, the Brexit negotiations have resumed, but remain tight and unpredictable.

The strength of markets in November has also been accompanied by a sharp rally in sectors impacted by the severe economic consequences of the pandemic. The oil price has risen by 25% in the last month as the prospects for recovery are factored in. Not surprisingly, oil companies were among the strongest performers over the past few weeks. Shares of financial companies such as banks and insurers have been battered since the Spring, but again, have been among the sharpest risers for the month. What remains to be seen is whether this resurgence in the share prices of “back to normal” companies can carry on into 2021. A fast and effective rollout of vaccines resulting in a quicker than expected economic recovery would certainly be a major contributor.