NOVEMBER 2020 Market Update

— Nov 27, 2020


The most important news of the past month has of course been the US election result and positive results on an effective vaccine for Covid-19.

Whatever your views about the two candidates, it now looks very likely that Joe Biden has won this very close and hostile election.

One of the main manifesto pledges of the Biden campaign was around the issues of global warming and the environment. The promise to heavily promote/accelerate investment in clean energy and to eliminate the use of fossil fuels as quickly as possible contributed significantly to his success, particularly among young voters.

This is obviously going to be beneficial for companies involved in this area and as a result we have initiated a position in the Jupiter Ecology fund for our model portfolios to benefit from this theme.

Conversely, in order to pay for this and other policy items, he has indicated his intention to raise taxes. We believe the lack of taxes paid by the big monopolies like Facebook, Amazon, et al will increasingly become an issue as will their monopolistic business practices. We consider they are already, in many cases, priced for perfection. The fact that hedge funds are generally currently all heavily invested in these names, as are the new army of novice traders in the US and elsewhere, adds to our suspicion that they will struggle to make significant headway from here in the short to medium term.

Meanwhile here in the UK, Rishi Sunak appears determined to hit the middle classes to pay for the huge cost of lockdown. Expect a rise in taxes such as Capital Gains Tax and reduced income tax allowances and opportunities to save tax free. Therefore at the very least it is more important than ever to make use of the allowances available like CGT and any areas of tax savings such as ISA’s where suitable.

Finally, regarding the vaccine news, we believe that as they become successful over the next few months now is the time to buy the depressed UK stock market given markets almost always move ahead in anticipation. We also think that within this, the areas where trading has been most depressed will be the ones that lead in the upturn.

As a confirming indicator of how cheap the UK stock market is, it is noticeable in recent weeks how many UK firms are receiving takeovers at premiums of up to 50% or more. As a reminder to our investors, we remain overweight UK equities.