Cambridge Weekly – 9th November 2020

Looking beyond the obvious

We wrote only last week that markets hate uncertainty. Given that equity, bond and commodity markets were all quite a lot stronger at the end of the week, many investors must have gained clarity, if not optimism. There are a lot of important things going on, too many to cover adequately even in our weekly, but we suspect most of our readers in the UK will have struggled to relate with the conclusion of our opening
paragraph. Readers will be well aware of US presidential politics although possibly the most important battle remains: the fight for control of the Senate. That will now not be finished until at least the last day of Christmas, and much of a Biden Presidency’s wish list hangs on that result, given a Republican-controlled Senate could seriously derail his policy agenda – as he knows from his time as Vice President to Barack
Obama.

October market returns review

The up and down markets of September resulted in what we described as a flat overall picture of consolidating markets. At first, the picture for October looked much the same, but ended with a more pronounced sell-off over the past two weeks. The looming uncertainty of the US elections, together with the return of lockdowns across Europe but uncertainty over matching fiscal support, meant that Western markets all closed the month in negative territory. Only Emerging Markets were once again able to generate positive returns. The positivity came predominantly from China and South East Asia not experiencing a second wave of the pandemic, thereby moving further ahead in the economic recovery that has now been paused elsewhere.

Lockdown 2.0 – at what cost?

Here we go again. Having had our fun, and eaten out to help out over the summer, the UK public is back indoors for the rest of November. What the government was keen to prevent still came as hardly much of a surprise last Saturday, given rapidly-rising hospital admission numbers, the tiered shutting of regions across the country and the European neighbours having already announced similar nationwide measures earlier in the week.. But a four-week (at least) re-entry into lockdown is significant for a country that has already experienced one of the highest virus-related death tolls relative to its population count – and the worst COVID-related economic contraction in the developed world. The BBC reported pictures of the nation’s last-minute shopping sprees – and anyone who tried to book a pub table on Wednesday evening can attest to the public’s desire for one last pre-lockdown libation. But with social proximity and travel dependent businesses shutting their doors again, and those supplying them with goods and services without orders, things will get tough in a number of sectors for the next few weeks.

Read the full commentary here