For Professional Clients only. Not for distribution to or to be relied upon by Retail Clients.
November might well be considered as a turning point when we reflect on the COVID-19 crisis in years to come, and the ‘annus horribilis’ that we have all endured during 2020. The announcement of three vaccines that are effective against the virus drove a risk-on mood in markets and added fuel to the post-US election rally, overriding worries about the shorter term global economic outlook. Japan (Nikkei 225), the UK (FTSE 100) and Europe (MSCI Europe Ex UK), who have been the worst performers to the end of October, were the best performers during November. The US (S&P 500), Asia (MSCI Asia Pac Ex Japan) and China (SSE Composite), also reacted positively.
Global value stocks outperformed their larger, growth orientated counterparts, and in fixed income, riskier high yield and emerging markets outshone the higher quality markets.
Performance of major equity markets during November 2020:
|UK (FTSE 100)||+12.69%|
|US (S&P 500)||+10.95%|
|Europe (MSCI Europe Ex UK)||+14.20%|
|Asia (MSCI Asia Pac Ex Japan)||+7.71%|
|Japan (Nikkei 225)||+15.05%|
|China (SSE Composite)||+5.19%|
Andrew Bailey, governor of the Bank of England has announced a further £150 billion of support as tighter lockdown rules hit the UK economy this month. He has previously vowed to do “everything we can” to support recovery whilst keeping interest rates on hold at 0.10%. Meanwhile, UK Prime Minister, Boris Johnson, has indicated that the tier system of restrictions will last until the end of March next year.
November saw vaccine progress and the NHS being asked to prepare to deploy any COVID-19 vaccine from early December with the most vulnerable first in line. Early trial results show that vaccines are more than 90% effective and on 2nd December, Pfizer/BioNTech had their vaccine approved by the Medicines and Healthcare products Regulatory Agency (MHRA) for use in the UK.
UK unemployment rose to 4.8% in the three months to September creeping gradually higher with the expectation that, despite an extension to the furlough scheme to the end of March, unemployment will move higher in the coming months. Chancellor Rishi Sunak has highlighted that this is a key priority as part of his spending review and intends to promise a £4.3 billion package to help hundreds of thousands back to work. He introduced his historic address: “Our health emergency is not yet over and our economic emergency has only just begun.”
UK GDP shot up 15.5% in the three months to September in comparison to the previous quarter which is the quickest pace since records began in 1955, according to the Office for National Statistics (ONS). However, this is still 9.7% less than the final three months of 2019. Recent restrictions are likely to have a further negative impact on economic growth.
Data released in November showed that UK retail sales rose for a sixth straight month in October, helped by early Christmas shopping as consumers moved to get ahead of virus lockdowns that closed stores. ONS also reported that most retail sectors have now recovered to pre-crisis levels, apart from clothing and fuel. Online shopping, which has boomed during the pandemic, is up 45% compared with February.
After a rather lengthy vote count Joe Biden won the race to become the next US president and declared that now is the time for the US to “unite and heal”. Vice president Kamala Harris will become the first female to take on the role and markets rallied to new highs on news of the result.
The US Treasury has not extended some of the Federal Reserve’s emergency lending measures which prompted the Fed to warn that the US economy remained strained and vulnerable in the face of an uncertain outlook and rising coronavirus cases. With a new administration incoming markets will be watching with keen interest for indications of how the economy will be supported.
The European Central Bank’s (ECB) president Christine Lagarde commented: “The key challenge for policymakers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum.” She said that financing costs will remain “exceptionally favourable” until the economy recovers from the pandemic. Such commentary supports market expectations that the ECB will expand bond-buying (the pandemic emergency purchase programme – PEPP – currently stands at EUR650 billion) and continue cheap lending. Its targeted longer-term refinancing operations (TLTRO) has lent almost EUR1.5 trillion to banks at extremely low rates. Lagarde has refused to offer help for over-indebted Eurozone governments while the European Commission has urged EU member states not to build up unsustainable debt positions.
Brexit negotiators are exploring the idea of review clauses to break the deadlock in EU-UK trade talks with a view that parts of the deal could be revisited several years after they take effect. With the UK leaving the EU’s single market and customs union on the 31st December time is becoming of the essence for an agreement to be reached. EU chief executive Ursula von der Leyen has said that: “The next days are going to be decisive.”
Performance of major equity markets Year to Date (2020):
|UK (FTSE 100)||-14.36%|
|US (S&P 500)||+14.02%|
|Europe (MSCI Europe Ex UK)||+0.09%|
|Asia (MSCI Asia Pac Ex Japan)||+13.08%|
|Japan (Nikkei 225)||+13.76%|
|China (SSE Composite)||+11.20%|
With vaccine news signalling that there is light at the end of the tunnel, uncertainty around the length of the COVID-19 crisis is beginning to fade, which in turn is brightening the outlook for risk assets – despite the difficult winter ahead for the economy. Within equities, the outperformance this month of this year’s losers makes sense, with a return to normality now on the horizon.
The US election and a potential COVID vaccine can now be treated as complete items, leaving the ongoing Brexit outcome and further US fiscal support as the remaining known unknowns on the agenda.
Since the initial shock to markets at the end of February we have felt that maintaining a consistent, balanced approach to asset allocation is likely to be the most prudent way of achieving each of the respective model’s objectives. With positive signs that there are glimmers of light at the end of the tunnel, we continue to hold this view, and although a little more optimistic, are still mindful of the damage that has been done to the global economy and how this may potentially manifest itself through to markets.
The following is a summary only of some key items in the Prospectus.
Capital is at risk. Investors in Protected Cell Company (PCC) must have the financial expertise and willingness to accept the risks inherent in this investment.
Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
The Master funds will be exposed to stock markets. Stock market prices can move irrationally and be affected unpredictably by diverse factors, including political and economic events.
It should be appreciated that the value of Shares is not guaranteed and may go down as well as up and that investors may not receive, on redemption of their Shares, the amount that they originally invested.
Investment in the Company should only be undertaken as part of a diversified investment portfolio.
Investment in the Shares should be viewed as a medium to long term investment.
Shares may not be redeemed otherwise than on any Dealing Day.
There will not be any secondary market in the shares of the Company.
This material is for distribution to professional clients only and should not be distributed to or relied upon by any other persons. The Cells referred to are a cell of Marlborough International Fund PCC Limited (the ‘Company’), a protected cell company incorporated in Guernsey and authorised as a Class B Collective Investment Scheme under the terms of the Protection of Investors (Bailiwick of Guernsey) law, 1987, as amended. Investment may only be made on the basis of the current Prospectus, this can be found on the website www.marlboroughinternational.gg.
Marlborough International Management Limited is incorporated in Guernsey. Registration No. 27895.
Regulated by the Guernsey Financial Services Commission. It is not protected by any investor compensation scheme.
Licensed under The Protection of Investors (Bailiwick of Guernsey) Law 1987. Guernsey Office: Town Mills South, La Rue du Pre, St Peter Port, Guernsey GY1 3HZ. Tel: +44(0)1204 589336.