After hesitating for two months, global equity markets rose by around 10% in euros in November. The US elections, the second wave of the Covid-19 pandemic and the economic slowdown it caused put investor sentiment to the test.
In November, these sources of uncertainty gradually dispersed. First, it became clear that the doomsday scenarios envisaged for the US elections (rejection of results, riots, etc.) were largely overstated. Of course, the outgoing President Donald Trump took time to acknowledge defeat, but he was quickly discredited by the press and received little support even within his own party.
Regarding the pandemic, the number of new cases and deaths caused alarm, leading governments around the world, especially in Europe, to apply new restrictions such as curfews and varying degrees of lockdown.
On the economic front, the euphoria of the spectacular rebound in Q3 gave way to increasing uncertainty. In the United States, unemployment remains high and consumer confidence has still not picked up. The number of unemployment insurance claims remains high (around 700,000 per week, compared to approximately 200,000 before the pandemic) and government support programmes have expired, so we could see downward pressure on households’ disposable income. For this reason, a new stimulus plan is inevitable and is expected to be announced in the coming weeks.
However, news about several effective Covid-19 vaccines was the real game changer.
Pfizer, Moderna and AstraZeneca have all reported very encouraging results and their vaccines have entered the approval phase. Governments in the United States, Great Britain and Germany are even considering starting vaccinations in December.
This makes us much more optimistic about the future of economic fundamentals. Although the foundations are still shaky, activity should pick up in all sectors once physical distancing rules are removed. In our investments, we are no longer underweight on equities and are now neutral. We expect to benefit from both the well-established long-term trend in the US technology sector and from the catch-up effect that should continue to benefit European companies operating in more traditional industrial sectors.
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