Jeff Lewis, director at Edinburgh IFA RobMac, reflects on the impact of both the US election and vaccine news.
“So, where do we go from here? There are signs that institutional investors are moving back into the market as many hesitated in putting cash to work because they were nervous ahead of the US election and vaccine results.
With positive headlines on vaccine development by Pfizer, Moderna and now Astra Zeneca we should see markets gradually rise over the next few weeks. This is good news and it seems that many Fund managers & Institutional investors have been biding their time before committing further to the market.
As they decide how to position their portfolios for 2021, we expect most to take a pro-risk stance. Yes, we’ll get bad news on the world economy, especially from Europe, as a result of the re-imposition of tough lockdowns but the outlook for the world is a road back to normality, and while it will take time, we feel we can be reasonably confident that medical science has handed us the key to the door of full recovery.
But what will be the major themes within markets?
Once again, it’s hard to see much departure from the rotation/reflation theme. Those companies that suffered most from the virus – travel and leisure – should benefit most over time. Of course, many were in trouble before the pandemic, but they still seem to offer upside from here.
Geographically, emerging markets outside of China should also do well but never underestimate the power of a US bounce back as a driver of economic growth and further market returns.
For the UK it appears we are heading for a deal on Brexit, and sterling has strengthened in response to this.
In conclusion
Overall, we have to be cautiously optimistic that returns will be positive from now and through 2021. What we do know and have seen this year is the ability for Investment markets to bounce back from a crisis and reward investors that keep their nerve when all around they see confusion.
Remaining in cash for long periods of time will neither protect nor provide above inflation returns for your money, its perhaps a good time to return to long term planning.”
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