We appreciate you may be wondering if we are living in the real world, given this optimism in the face of the continuing negative and upsetting news headlines as total infections, hospitalisations and deaths continue to rise, but these vaccines mean we are finally at the beginning of the end of this horrible outbreak.
Additionally, equity markets were supported by the conclusion of the US presidential election as the formal transition process from Donald Trump to Joe Biden officially started, coupled with this week’s economic data, which on the whole came in better than we expected. For example, Monday’s (23 November 2020) US PMI (Purchasing Managers’ Index) data (please see here) not only beat expectations but showed that the US economy’s (the largest in the world) expansion is accelerating.
As a consequence, it is important to look past the current news headlines and focus not only on the brighter 2021 we can all enjoy, but also the long-term prospects for equity markets, as a post-coronavirus world makes them look attractive given the expected widespread recovery in both economic activity and company profitability.
In fact, we believe a Goldilocks environment will soon return – i.e. global economic growth coupled lacklustre inflation (which means the major central banks such as the Fed, BoE, ECB and BoJ, will keep monetary policy loose).
Looking ahead, we have a relatively quiet economic calendar this week. Of most interest will be the weekly US jobless claims data on Thursday (3 December 2020) given this week’s mildly disappointing reading (please see here) and the US employment data (non-farm payrolls; unemployment rate; participation rate; and average earnings) on Friday. Other US data includes: ISM (Institute for Supply Management); trade balance and factory orders.
Elsewhere we have Eurozone CPI inflation and retail sales; Japanese industrial production and retail sales; and Chinese PMI (Purchasing Managers’ Index).
Investment Management Team