Market Update – 11th November 2020.

We have previously stated that while the US Presidential election was important, it is progress on a coronavirus vaccine that will have a far greater impact on global equity markets as a vaccine will allow economies to fully reopen and thus speed up the economic recovery – and that several pharmaceutical companies were due to announce their Phase-3 trial results in the coming weeks (Phase 3 is just one step away from regulatory approval).

And on Monday (9 November 2020), we had an announcement from the US pharmaceutical company, Pfizer, which literally blew our socks off:  their coronavirus vaccine was over 90% effective in a trial involving over 43,500 participants.  The effectiveness was expected to be around 60%-70% – so 90% is extraordinary!

Additionally on Monday, Novavax, a US biotechnology company, announced that the US FDA (Food & Drug Administration) had granted a fast track designation for its coronavirus vaccine. While Moderna, another US biotechnology company, is expected to report its vaccine trial results any day now.

As a result, global equity markets have risen sharply this week.  On Wall Street the Dow Jones has risen nearly 1,100 points (3.87%) so far this week and the S&P 500 has risen 1.03%.  In the UK, the FTSE-100 is currently up over 6.5%.

Not only does this represent a huge first step back to some much needed normality in the coming year, but it is a game-changer for the recovery of beaten down equity markets, such as the FTSE-100.

Due to the FTSE-100’s constituent make-up the index is dominated by sectors such as Oil & Gas (accounting for 8.5% of the index) and Financials (19.5%) – and these sectors have been particularly hard hit by the coronavirus induced economic contraction – and as a consequence, before this week’s vaccine announcement, the FTSE-100 was down over 20% since the start of the year.

While we fully appreciate that the Pfizer vaccine (or any of the other vaccines currently being trialled), will still take time to finish its development and get approval, not to mention produce and distribute, we believe that this week’s market moves are only the beginning as a safe and effective vaccine is the ultimate economic stimulus that the global economy desperately needs.

Furthermore, the confirmation of Joe Biden as US President elect, is likely to result in a more moderate, centrist agenda – and a less combative stance towards China should also help to revive global trade.

Investment Management Team

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