Newsletter – 13th November 2020

The week in perspective                                                                 13 November 2020

Last week that the UK drugs regulator had started accelerated reviews of the vaccines under development, I hadn’t expected Pfizer and BioNTech would be announcing the success of their vaccine, which has had more than a 90% effectiveness in the trials of some 44,000 people and to which investors have latched onto, sending all global stock markets soaring.

Indeed, yesterday was the first day in eight that stock markets have taken a step back, but only by small amounts.

So, what do we know about this vaccine? Well despite the exuberance of investment markets, it seems that there are still many questions that need answering, for instance who it protects, for how long and from what.

Furthermore, I understand that its performance in key groups such as the elderly and people with chronic health conditions, like diabetes, is yet to be determined and the four-month study doesn’t tell us how long the protection lasts for.

There is also the challenge of storing the vaccine at temperatures below -80°C (your freezer works at around -18°C), then there’s the manufacturing and distribution of the vaccine and, of course it needs to be administered.

Pfizer and BioNTech expect to make some 50 million doses this year, the UK having secured 10 million and about 1.3 billion next, however you need to divide these numbers in half, as each person needs two shots to be immunised.

Pfizer and BioNTech won’t be the only game in town and we wait to see what AstraZeneca and University of Oxford come up with, as they are close to the final stages of approval of their own vaccine, as well as the dozens of other companies, including the Janssen and Novavax vaccine, all busy trying to find a workable and safe solution.

Despite these questions, this is still very exciting news and whilst I don’t want my observations above to appear negative, I’m sure we’re all aware we have some way to go, nevertheless this is a big step in the right direction.

It’ll be interesting to see whether markets have found themselves a new level from which to move ahead from, though the likes of the Dow Jones and the S&P 500 in the US are pretty close to their all-time highs, with Japan and Germany’s stock markets similarly approaching their recent peaks. Sadly, the FTSE 100 and the FTSE All Share index still have some way to go, the share prices of industries such as travel, leisure, industrials and finance, which form a major part of the FTSE indexes, all having been hit by coronavirus.

Against this backdrop, we still have Donald Trump contesting the election result and there is still to be the two run-off elections in Georgia in January to determine who will control the Senate. Both of these are likely to have some impact on the American stock markets and, as always happens, those of the rest of the world. For the time being, at least, it is clear that investment markets are pleased with President-elect Jo Biden.

The current President could also face legal challenges to his business empire in his home state of New York, where the Attorney General, Letitia James, is reportedly gathering information that could provide further insight into the company’s operations and tax strategies.

You may be aware that the President has the power to offer a clemency pardon, which he’s given to various friends and associates over the past four years, however he cannot do this for himself, leading some to question what might happen when he leaves the White House in January, assuming he does of course!

In the week that Boris Johnson’s head of communication resigned, potentially leaving several aids, including Dominic Cummings, to consider their future (Cummings has decided to stay, but he will be gone by Christmas), the Prime Minister is having to restructure his premiership whilst in the background, Brexit remains outstanding.

Michel Barnier has been in the UK again this week as the UK and EU talks come down to the wire, so they need to make some progress in the next couple of weeks if a deal is going to be made before the end of the year. The key issues remain a level playing field, so businesses on one side don’t have an unfair advantage against those on the other, trade agreements, where the EU wants the UK to stick closely to their rules on things like workers’ rights and particularly state aid (financial assistance given by governments to businesses), and of course, fishing rights.

President-elect Biden has weighed in saying that his administration would look dimly on the UK doing anything that would jeopardise the Good Friday Agreement.

As an individual country, the US took 15.7% of our exports in 2019. As a region, the EU is our biggest export partner accounting for 43% of our exports in 2019, whilst we imported £374 billion of EU goods, so around 50% of all our imports.

We also heard yesterday that our gross domestic product (GDP), which is the total value of the goods and services produced by a country over a given period, grew by a record 15.5% in the third quarter of this year, more or less in line with what analysts had expected. Nevertheless, we are still nearly 10% down from where we were a year ago and the concerns are that the economy could shrink as a result of the second lockdown. That said, speaking to friends and clients in manufacturing, they are as busy as they have ever been, so let’s hope they are not in isolation.

As to the Adler portfolios, well as you’d expect they’ve recovered nicely too over the past couple of weeks, though not to the percentages of global stock markets as, of course, not all of your investments will be held in shares and for some of our clients in the less risky portfolios, their equity exposure will be no more than 25%. Nevertheless, if you were to take the relative performances over the past 12 months, you could be forgiven for forgetting that we were in an investment freefall during March and April.