By late October, there was ample evidence that the global Covid infection rate was spinning out of control. Equity markets were weaker, down a second consecutive month, while the upcoming US election was dividing the country’s population like never before.
However global traders betting on a continued slump absorbed a $163bn loss in November, adding to losses incurred earlier in the year, according to Bloomberg news.
Since the trough reached in March, the equity market recovery has confounded sceptics, and investors sitting on the sidelines missed out last month as the Dow Jones Industrial index recorded its best month in over 30 years, rising 11.8%.
Meanwhile, the MSCI World Index was up 11.72% year-to-date as at 30 November, having trounced the returns on dollar cash.
But where to from here? UBS Asset Management suggests that “there’s probably a higher floor to multiples because the market will know that as soon as we hit that recession, you’re getting not just the monetary policy offset, but fiscal as well.”
At Dynasty, we are exercising caution as the risks for a market correction remain ever-present. However our medium-term investment case for new funds to be directed to global equities remains compelling, as stocks with increasing dividend streams remain attractive relative to many other asset classes.
We continue to engage with clients at an individual level, where bespoke strategies are devised to enter/ re-enter the markets, with alternative investments being put forward dependent on investor appetite for short-term volatility. The overarching objective is to provide superior returns compared to cash over the longer term.
“After the biggest economic downturn since the Great Depression, and one of the fastest recoveries in equity markets on record, positive news on the Covid-19 vaccine race helped the Dow Jones Industrial Average to record its best calendar month return since 1987. In November the index rose 11.8%, the best month in more than 30 years. So now what? I believe that despite some vulnerability in the short-term, a mini GDP slump and pretty exuberant market sentiment, the outlook for equities for the next 12 months looks pretty upbeat. Approval and wide distribution of numerous vaccines means we will get on a path to a new normal next year. In this scenario company earnings can recover significantly, driving equity prices higher.”
– Jeroen Blokland, a Portfolio Manager at Robeco, a Dutch asset management firm
- The new forecast from the US Centers for Disease Control and Prevention is that close to 450 000 Americans will have died from the coronavirus by February 2021, unless a higher percentage of the population start to follow disease prevention protocols such as wearing masks. The current death toll in the US stands at 275 000.
- The UK ruffled a few feathers this week by being the first country to approve a vaccine. The backlash from other countries has been that this was a rushed and irresponsible decision that did not follow the regular vaccine approval protocol. However, widespread rollout of the vaccine looks imminent and could happen before the end of the year.
- The US Justice Department is investigating whether money funneling through to the White House may be bribes in exchange for presidential pardons. Names are yet to be announced, but top contenders for pre-emptive pardons are Trump’s legal counsel Rudy Giuliani as well as Trump’s family members.
- China has imposed tariffs on Australian wine imports, effectively cutting off Australian winemakers from their most important export market and forcing businesses to scramble for alternate plans. Relations between the two countries have swiftly deteriorated after Australia called for an investigation into the origins of the coronavirus earlier this year.
- Hungary and Poland are set to veto the European Union’s (EU) $2.2 trillion spending package in a dispute over democratic standards. Unanimous approval by all 27 EU governments is needed for allowing the bloc’s executive arm to raise debt in capital markets to finance the package.
- Copper rallied to a fresh seven-year high in London, with this year’s surge looking set to extend further as macro investors search for assets offering exposure to a global post-pandemic recovery. The copper market is witnessing its sharpest rally in more than a decade, with China’s rampant appetite for commodities in the wake of pandemic-related supply disruptions, lifting prices more than 75% from March lows.
- Salesforce announced that it would buy the workplace software company Slack for $27.7 billion in cash and stock. This comes as the pandemic increases the demand for tools that enable people to work remotely.
- Green hydrogen may save the world from devastating climate change. There is both excitement and trepidation around hydrogen announcements from Europe, Australia, and Chile, as the proposals require high investment, and it is not yet known whether the technology will ensure successful outcomes. The EU envisages spending as much as 470 billion euros on green hydrogen by 2050.
- South Africa’s main stock index advanced for a fourth consecutive day to its highest intraday level since April 2019, with Anglo American Plc jumping to a 12-year high, whilst strength in the rand lifted banking shares.
- South Africa has started to see signs of a second wave of the coronavirus. President Ramaphosa last night announced that Nelson Mandela Bay would be placed under specific restrictions, but that a national lockdown would be unlikely as the economic consequences trumped the concerns about escalating infection rates. In preference, hotspots will be identified and targeted on a case-by-case basis.
- Although four vaccines for Covid-19 have now been announced, what is a concern is that developing countries will be left behind in the vaccine rollout. COVAX, a funded global collaboration involving 187 countries, aims to ensure that this is not the case by assisting 92 of the least advanced countries to buy and rollout the vaccine to 20% for their most vulnerable populations.
- Stephen Grootes has written an article on how the fragmentation of the ANC is inevitable. Evidence is gathering that the central political authority in the governing party is weakening across the provinces and constituencies. Grootes reasons that this breakdown will continue at least until the ANC’s next conference in 2022.
- Our consulting political analyst, Professor Ivor Sarakinsky, has written an article for News 24 on how the ANC will confront those cadres facing charges of corruption. The NEC meeting this weekend will be particularly revealing as it could set a precedent in terms of the manner in which it handles Secretary General Ace Magashule’s corruption charges.
Sources: Dynasty, Reuters, Bloomberg Markets, The New York Times, Daily Maverick, and Moneyweb, etc