Equity markets notched their best performance on record in November as investors cheered three, separate, COVID-19 vaccines which posted pleasing results in late-stage trials. Market participants were quick to price in a sharper economic recovery, with monetary and fiscal policy remaining ultra-easy and the vaccine providing hope for a quicker return to normality in 2021. There was also further clarity for the market as Joe Biden’s election to the White House, combined with a split Congress, provided another positive catalyst for risk assets. The risk-on trade was fuelled by Joe Biden’s fiscal agenda and softer stance on trade, combined with the inability for Democrats to pass tax rises through Congress. Safe havens such as gold and US treasuries sold off whilst emerging markets tracked the positive sentiment seen across developed markets.
Although medium term expectations markedly improved, in the short-term the health crisis has worsened, COVID-19 restrictions in the West have tightened and economic momentum has slowed. Concerns remain over how economies were managing to deal with the pandemic as cases across the US and Europe continued to climb, resulting in further, stricter, lockdowns. Cases within the US hit 17 million by mid-December with deaths now well over 300,000. Similarly, within Europe, France implemented a new nationwide curfew as they struggled to quell a rise in cases. Germany also instituted a new nationwide lockdown. That said, investor concerns have been shrugged off throughout December as the positive vaccine news provided a light at the end of the tunnel whilst the prospect of further fiscal policy firmed, and central banks maintained their ‘lower-for-longer’ rhetoric.