The UK first went into lockdown on March 23rd – very nearly eight months ago. At that time we started sending our clients a weekly update, keeping them in touch with the key economic news, the performance of world stock markets and our general thoughts.
As everyone will know, England is now back in a second lockdown as the Government tries to bring the Covid-19 pandemic under control with the other countries of the UK in various states of lockdown and tiered variations! This latest English lockdown will last until Wednesday December 2nd with pubs, restaurants, gyms and non-essential shops all closed, and anyone who can work from home being told to do so.
Against this background of a second pandemic wave and increased uncertainty, we therefore thought it appropriate to bring our weekly client updates back, so that we can keep in touch with clients as we did earlier in the year. As before, we’ll send the updates out every Friday. We’ll do this up to December 18th and then take a break over Christmas and New Year. Then we’ll see how the world looks on Friday January 8th…
We have stuck to the same format that proved so popular with our clients last time, so let us get straight on with the latest news. As previously, the stock market figures quoted were correct as of close of business in the relevant markets on Wednesday, and the update was written on Thursday morning.
The Latest News
The big news so far in November has, of course, been the election of Democrat Joe Biden as the next President of the United States. As we write, more than a week after the election, the final result has still not been declared, but Biden has enough votes in the Electoral College to take him past the 270 needed for victory.
There has, though, been no concession from President Trump and he has pledged to fight the result and prove allegations that the Democrats ‘stole’ the election through vote-rigging in the courts.
As we mentioned above, the UK finds itself back in varying degrees of lockdown. Hopes for an effective vaccine have leapt this week but it will still take some time to arrive. Newspaper headlines saying ‘back to normal by Spring’ may prove premature and while restrictions may be relaxed over Christmas, it would be no surprise to see the tiered system of Covid assessment continue for the foreseeable future.
In other news UK job losses in the wake of the pandemic continue to mount and with less than two months to go before the end of the withdrawal agreement, the UK and the European Union are still to reach a deal.
In the Far East the Chinese authorities pulled the plug on the stock market flotation of Ant Group, which would have raised over $34bn (£25.6bn) and been the world’s biggest ever stock market debut. There are increasing signs that the authorities in Beijing are looking to stamp down on what they see as the excessive power of the country’s internet giants. Meanwhile in Russia rumours about Vladimir Putin’s health circulated, with suggestions that he may step down in January.
The Stock Markets
We have used two comparators for our first market report of this new series of client updates. First of all, we have compared stock markets to the levels at which they closed October 2019, which will give a 12 month view, and show the impact of the pandemic. Secondly, we’ve compared them to their closing levels on Friday October 30th. In that instance, the figures quoted will cover an 11 day period which, as above, took in the news about the US election and a possible vaccine for Covid-19. In future client updates we will look at markets’ performance on a weekly basis.
Performance since October 31st 2019
It’s tempting to think that markets must be down over the last 12 months due to the impact of the pandemic. That’s not the case, with several markets, especially in the Far East, showing healthy gains.
South Korea leads the way. It is up 19% since October last year, closing Wednesday at 2,486. China’s Shanghai Composite index is up by 14% to 3,342 while Japan’s stock market is up 11% to 25,350. The Hong Kong market is down 3% to 26,227 following a year in which Beijing’s crackdown on the pro-democracy movement has been well documented.
In Europe, the German DAX index is up 3% to 13,216. It is a less rosy picture in France where the market is down 5% to 5,445 and sadly the picture is even worse in the UK. The FTSE100 index of leading shares is down 12% since October last year, closing Wednesday evening at 6,382.
Both the major markets in the US are also up. The Dow Jones index closed Wednesday at 29,398 for a gain of 9%, while the more broadly-based S&P500 index fared even better. It has risen 17% since October last year and closed Wednesday at 3,573.
Performance since October 31st 2020
Stock market performance over the much shorter period from the end of October this year is, as you would guess, uniformly positive, with all the major markets we report on in the update making gains.
In Europe both the FTSE and the German stock market are up 14%. The French market has fared even better with a rise of 19%.
South Korea again leads the way in the Far East. Along with Japan it is up by 10% since the end of October. The Hong Kong market is up 9% while China’s Shanghai Composite index has posted a more modest rise of 4%.
The markets in the US have also responded well to their President-elect. The Dow Jones index is up 11%, the S&P 500 by 9%.
Finally, a word for the Russian stock market. Boosted by its own vaccine against Covid-19 – the splendidly named Sputnik V, which is apparently even more effective than Western vaccines – the Russian market is up 12% since the end of October, at 3,015.
The pound is up slightly against the dollar. It ended October 2019 at $1.2944 and October 2020 virtually unchanged at $1.2954. It has since risen 2% and closed Wednesday at $1.3211.
Firstly, it’s good to be back. We enjoyed writing these updates for our clients and know that many people enjoyed reading them. So it’s good to pick up our virtual ‘pen’ again.
Secondly, it has been a difficult year and hopefully we have always been here to answer your questions. We have always stressed that saving and investing is a long term commitment and no year will ever illustrate that better than 2020.
The pandemic has, undoubtedly, accelerated trends which might otherwise have taken 20 or 30 years to arrive. It is hard to imagine, for example, that retail in many towns up and down the UK will ever fully recover from the past year. Nevertheless, as we have just seen, global stock markets have proved resilient. There are plenty of grounds for optimism as we look forward to the coming year.
…And, although the world has been a serious and sombre place for these last few months – and while we’ve all come to know and love Zoom (astonishingly, Primark reported that sales of pyjamas are up and sales of business suits are down) – there have still been some good news stories to put a smile on our faces. So let us end this update by sending our congratulations to Tilly and Kieran, who married in Bath a few days ago.
Tilly and Kieran met at school when they were 12, and they’ve decided to hyphenate their surnames for their life together. The update will be back next week, in the meantime please raise your glasses to the happy couple: Kieran White and Tilly Christmas…