- 20th November 2020
- Posted by: Dean Hall
- Category: Newsletters
I hope that this update finds you keeping safe and well with increasing case numbers and sadly deaths moving upwards once more.
The recent announcements by Pfizer of a successful vaccine was certainly the shot in the arm that the markets wanted, and they reacted in a really positive way.
This did go hand in hand with the initial US election results as it appears that it is in fact a Biden win.
This will give us 4 years of democratic rule starting in January 2021, so a little time yet to plan. Trump is not going quietly and I’m sure that there will be some fights to pick and win before he leaves office.
In recent days the US markets hit historic heights and Japan hit heights that we haven’t seen since 1990 on the main indices. This goes to show how quickly that things can change and move forward once more.
However, the “silver bullet” vaccine news of a more cost effective and easier to store one by Moderna wasn’t met with as much excitement seeing as the first breakthrough was all that was needed. Other drug companies are now playing catch up with many larger players still to announce their own results, which will follow. The next real lift here will be once these vaccines are actually being given.
With this in mind and the change of fortunes this news created, I have used three household names here to show how this has affected their share price. These companies are EasyJet, Wetherspoons and Ocado.
The announcement was made on the 09/11/2020 and as you can see from the above EasyJet (A) went a little crazy on the news that there simply is a vaccine. This of course would open the boarders once more and holidays are back on. This then goes hand in hand with hospitality being able to reopen, at some point hence Wetherspoons (B) seeing positive gains.
However, the interesting outcome is Ocado (C) which saw a fall. This can only be attributed to the fact that the online demand may well start to reduce as people go back to visiting shops.
Ocado do have a major advantage over other grocers seeing as their logistics are so superior and robots do run the show there. The likes of Tesco, Asda, Morrison’s and Sainsburys do have some catching up to do on picking and packing seeing as its still humans that do it for them. Ocado are now a technology company that sells groceries, so it seems.
This positive vaccine news actually saw a negative impact with Netflix and Amazon as well. The theory here is that people will not be at home watching box sets and home shopping but outside living their lives with a vaccine to fall back on.
There remains to be a great deal of volatility in the markets overall and as we close the year out now with more and more vaccines to be announced their success and importantly their application will continue to move the markets on any news, be it good or bad.
This week we have seen the official inflation figures increase to 0.7% from 0.5%. It’s a small increase but one of which I expect to see gather more pace over the coming months.
Interest rates are still being placed under pressure and the move toward negative rates is a real possibility now. The regulator has reached out to the financial world to ask them how this would work and if they are ready for this. I don’t feel they are ready for negative rates, but these are becoming more and more of a reality now.
Taxation is on the agenda in Whitehall and how the books can be balanced. The recent announcement around capital gains tax being aligned with income tax is concerning seeing as for many investors having the allowance is crucial to their income and investment planning. This could see a large part of the investment world going back to the drawing board if this change was made.
Tax increases are coming, and capital gains is only the first on a very long list of which will be reviewed.
Finally, Brexit is looming, and this will be a focus as we close out 2020. The UK looks to be a region of great potential and with a positive outcome here this could well provide a very welcomed end of year bounce. This will play out in the coming weeks so we will know this outcome very soon.
As always please feel free to get in touch be this for business or just socially. We are here to support and guide you in anyway which we can and it’s always nice for a catch up.