November to Remember!

So long, farewell, auf wiedersehen, adieu… Most of us will be happy to see the back of 2020 and are longing for a shift of emphasis in the news on our televisions and in our newspapers. However, the recent shift of focus onto the thorny issue of Brexit and the likelihood of achieving a deal before the end of the transition period has not provided us with the kind of positive outlet that most of us would want. Therefore, I would like to focus on some positive news for equity investors instead – the fact that we have just had a “November to remember”.

A widespread focus on the perceived safe havens of gold and government bonds was replaced by renewed interest in equities. Many major equity markets notched up double-digit gains over the month, buoyed by significant breakthroughs in the development of coronavirus vaccines. Positive results from a vaccine developed by Pfizer and BioNTech were followed by Moderna’s vaccine, and then by a vaccine developed by the University of Oxford and AstraZeneca.

Investors were heartened by Joe Biden’s eventual victory in a bad-tempered and tumultuous US Presidential election. Uncertainty surrounding the transition from a Trump to a Biden presidency dissipated as the month went on; whilst repeating his allegations of fraud, President Trump confirmed that he would co-operate with the incoming administration. Sentiment was further buoyed by the news that President-elect Biden had nominated former Federal Reserve (Fed) Chair Janet Yellen as his Treasury Secretary. The Dow Jones Industrial Average Index breached 30,000 points for the first time ever during November and rose by 11.8% over the month.

As the national lockdown drew to an end in England, the UK Government announced that the country would move to a regional “tiered” system, raising concerns over the impact on the hospitality and leisure industries. Nevertheless, news of significant progress in the development of a Covid-19 vaccine provided a welcome boost for sentiment, and the FTSE 100 Index rose by 12.4% over the month. Elsewhere, the Chancellor of the Exchequer warned that UK economic output is not expected to return to pre-pandemic levels until the end of 2022.

President of the European Central Bank (ECB) President Christine Lagarde warned that the pandemic has created “a highly unusual recession and is likely to give rise to a similarly unsteady recovery”. Although she welcomed the “encouraging” news about vaccines, she believes the recovery was likely to be “rather unsteady, stop-start and contingent on the pace of vaccine roll-out”. Nevertheless, over November as a whole, the Dax Index rose by 14.9%, while the CAC 40 Index soared by 20.1%.

During the month, the leaders of 15 Asian nations – including Japan, China, South Korea, Australia, New Zealand, and the ten ASEAN countries – signed the Regional Comprehensive Economic Partnership (RCEP), a trade deal that will encompass almost one-third of the world’s population and about 30% global GDP.

Whilst 2020 has been a year that will be remembered for all of the wrong reasons, we can take some solace in the fact that markets have actually held up incredibly well in the face of this terrible adversity. There are certainly hard times ahead and it will undoubtedly take some time for the economy to recover to pre-Covid levels. However, for those who are invested for the longer term (5 years or more), staying disciplined by continuing to invest in a widely diversified portfolio is likely to be the best course of action.

Source: Adviser Hub, Global Update: A November to Remember