With a clutch of vaccines on the way soon, equity markets were in a buoyant mood in November. But there are still a lot of things we don’t know – and even some things we don’t know that we don’t know…
Global stocks had a bumper month, and with a gain of more than 12% (in dollar terms) were not far off the January 1975 record when worldwide stocks soared 14.6%.
We know that a clutch of vaccines are approaching approval, boosting optimism about how quickly the West can beat back COVID-19. Still, there’s quite a way to go on production and distribution and the path to economic recovery and a more normal pre-COVID existence will be slow. Jerome Powell, Christine Lagarde, and Andrew Bailey, the respective chiefs of the US, European and UK central banks welcomed the vaccine news, but none of them are showing any signs of changing policy in the short term.
Mr Powell injected a dose of realism, saying “we’ve got a way to go” in reference to the rollout. All have emphasized the continuing high uncertainty in the short term. The final quarter of this year could see economies across the developed world stall again and the more optimistic forecasts for a bounce in companies’ 2021 profits reined in.
A relaxation of lockdown rules is welcome as the impact of the measures across the UK was brought into sharp focus. November’s activity index fell to 57 from 64, hit by lower traffic congestion and public transport usage, while not surprisingly online sales have risen 10%. This data would suggest a 5% fall in GDP in November, which is nowhere near the hit to the economy seen in April when GDP fell 25%. But it suggests that UK Q4 will be lacklustre at best.
We know that ‘value’ companies (those that are linked at the hip with economic growth) and nations with a high proportion of such businesses have absolutely flown lately. With so many people and so many more shops now open to ecommerce, annual Black Friday weekend online shopping in the US surged by nearly 22% from a year ago to a new record. But we don’t know how high unemployment will get or when we will be able to push it back down where it belongs.
And then the things we don’t even know we don’t know about …
It has been an odd year. A sad year. A peculiar year that, in the fullness of time, will probably become something of an anomaly for analysts, economists and investors. A data point so bizarre and distorted that it will have to be adjusted for, if not dispensed with entirely as an outlier. That in itself should remind us to stay humble about our ability to understand exactly what is going on right now.
We are trying to keep ourselves – and your portfolios – balanced. We are trying not to wed ourselves too much with one view of the world. We are constantly reassessing our assumptions and our approach in investing on your behalf. The future looks much brighter than it did a few short months ago, yet the world is still in a tough spot.
As we march toward Christmas it’s hard not to think of it with an unwelcome mix of concern, relief and sadness. Some of us won’t be able to visit our families for the holidays this year, whether because of illness, government orders, self-restraint or travel embargoes. For those who do meet up, many will be missing someone at the table because the virus has taken a loved one too soon.
For those who can and do visit family, the risk rises of greater spread of the virus that has ruptured 2020 and whose economic effects are likely to dog us for at least two years. As most of the UK comes out of another lockdown all eyes will no doubt be glued to the case statistics: has it managed to subdue our latest outbreak or will the numbers start to rise once more as the economy and our society are reopened once again. Immediate data is promising, with new cases roughly 30% lower than a month ago. But we’ll have to wait and see.