{"id":2101,"date":"2020-10-30T11:32:22","date_gmt":"2020-10-30T11:32:22","guid":{"rendered":"http:\/\/www.wealthatwork.co.uk\/jpm\/?p=2101"},"modified":"2020-11-18T09:26:10","modified_gmt":"2020-11-18T09:26:10","slug":"market-update-30th-october-2020","status":"publish","type":"post","link":"https:\/\/www2.wealthatwork.co.uk\/jpm\/2020\/10\/30\/market-update-30th-october-2020\/","title":{"rendered":"Market Update \u2013 30th October 2020"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><div class=\"vc_row wpb_row vc_row-fluid\">\n<div class=\"wpb_column vc_column_container vc_col-sm-12\">\n<div class=\"vc_column-inner \">\n<div class=\"wpb_wrapper\">\n<div class=\"wpb_raw_code wpb_content_element wpb_raw_html\">\n<div class=\"wpb_wrapper\"><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/qFBXsBuzPVk?rel=0&amp;wmode=transparent\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\" data-mce-fragment=\"1\"><\/iframe><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"vc_row wpb_row vc_row-fluid\">\n<div class=\"wpb_column vc_column_container vc_col-sm-12\">\n<div class=\"vc_column-inner \">\n<div class=\"wpb_wrapper\">\n<div class=\"wpb_text_column wpb_content_element \">\n<div class=\"wpb_wrapper\">\n<p>It has been a brutal week so far for global equity markets as the tug-of-war contest has seen the winning marker move decisively away from the side with the healthy company earnings (profitability) announcements, which have so far seen the vast majority of US and European companies beating analyst estimates and the prospect of further fiscal and monetary stimulus; to the side with rising coronavirus infections and the associated tighter lockdown restrictions and uncertainty surrounding next week\u2019s Presidential election.<\/p>\n<p>As such, on Wall Street the Dow Jones has lost 1676 points (5.92%) so far this week while the S&amp;P 500 has fallen 4.48%.<\/p>\n<p>While you may consider that we have recently sounded too sanguine given the comparisons that are currently being made to the increasing number of coronavirus cases and lockdown restrictions, coupled with the indiscriminate selling of equity markets we saw in February and March, it should be noted that today is very different.<\/p>\n<p>Although it is obvious that there will unfortunately be some rolling economic impacts related to localised and\/or regional coronavirus lockdowns until a vaccine becomes available, we are today much closer to a vaccine with several pharmaceutical companies due to announce their Phase-3 trial results in coming weeks, which is just one step away from regulatory approval.<\/p>\n<p>In fact, we believe that although the US Presidential election is 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.<\/p>\n<p>With regards to the US election, the chances of an uncontested and drawn-out election result have started to increase as the earlier assumption of a Joe Biden (Democrat) win is no longer a foregone conclusion.<\/p>\n<p>This is not to say equity markets favour one candidate over the other, it is just the potential uncertainty of a contested or delayed vote result, especially given the large proportion of postal votes \u2013 and many states can\u2019t open the envelopes to verify the vote against the electoral register until next the election day (Tuesday 3 November 2020), let alone start counting them.\u00a0 And it only takes one or two key swing states to put a halt to declaring a winner.<\/p>\n<p>Although it is an open question what a victory for either Donald Trump and Joe Biden would mean for equity markets, in the short-term a Joe Biden\/Democrat victory is likely to result in an even bigger fiscal stimulus package than the $2tr+ package that was being negotiated (although we may see tighter lockdown restrictions), plus other major initiatives like infrastructure spending and green energy (which would be positive for equity markets).\u00a0 However, it is also likely that the Democrats will reverse Donald Trump\u2019s tax cuts \u2013 which could act as a headwind as higher corporation and income tax obviously reduces company profitability and an individual\u2019s disposable income.<\/p>\n<p>Additionally, a Joe Biden victory is likely to normalise trade relations with China and Iran (and with Iranian oil coming back to the market, we may see a lower oil price), however a Democrat victory is also likely to result in stricter regulatory constraints on business (especially technology companies \u2013 and stocks such as Alphabet, Amazon, Apple, Facebook and Microsoft account for a large proportion of the US equity market).<\/p>\n<p>As for the UK, the FTSE-100 falls this week has taken its year-to-date decline to 26%.\u00a0 Our long-term growth portfolios are diversified across a variety of asset classes (equities, fixed interest and cash) and geographies, such as Europe, Asia and the US \u2013 and while this diversification hasn\u2019t unfortunately stopped client portfolios from falling, it has helped to protect against bigger losses, as over the same period (since 31 December 2019), a typical\u00a0<strong>my wealth<\/strong>\u00a0Cautious portfolio is down 4.32%, Balanced down 11.30% and Adventurous -6.52%<\/p>\n<p>Although we appreciate that this equity market weakness is unnerving, we don\u2019t believe long-term investors need to be overly worried.\u00a0 As we have previously warned, the path for equity markets is never smooth \u2013 that is why we take a long-term approach to investing, as evidence shows that this leads to better performance as time in the market is more important than trying to time the market.<\/p>\n<p>Additionally, we don\u2019t believe that the recent coronavirus resurgence is likely to cause anywhere near as much damage to the global economy and equity markets than it did during the first half of the year \u2013 and the US showed during the summer, their economic recovery continued despite a resurgence of infections.\u00a0 In fact, yesterday\u2019s (29 October 2020) US GDP data showed that the US economy expanded by an enormous 33.1% during the third quarter (almost a mirror-image of the 31.4% contraction we saw during Q2). \u00a0Also, consumer spending rose 40.7% \u2013 no doubt helped by employment market which continues to recover strongly as the weekly US jobless claims data showed continuing claims (which reflects the total number of Americans claiming unemployment benefits) fell to 7.76m from 8.37m last week and 10m the week before.<\/p>\n<p>Consequently, it is important to look through the cacophony of noise, as we believe equities could post some very solid gains in the months ahead as once the US Presidential election is out of the way, the market\u2019s focus will shift to progress on a coronavirus vaccine.<\/p>\n<p>However, we would like to stress that we aren\u2019t naively and blissfully ignoring the current uncertainties (especially as the coronavirus story will still be with us well into 2021) and as such, we are maintaining a defensive stance by holding a slightly higher than normal level of cash (including liquidity funds) in our long-term growth funds.<\/p>\n<p><strong>Investment Management Team<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n  <\/div> ","protected":false},"excerpt":{"rendered":"<p>It has been a brutal week so far for global equity markets as the tug-of-war contest has seen the winning marker move decisively away from the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"_links":{"self":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2101"}],"collection":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/comments?post=2101"}],"version-history":[{"count":2,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2101\/revisions"}],"predecessor-version":[{"id":2117,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/posts\/2101\/revisions\/2117"}],"wp:attachment":[{"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/media?parent=2101"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/categories?post=2101"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www2.wealthatwork.co.uk\/jpm\/wp-json\/wp\/v2\/tags?post=2101"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}