November was a very positive month for investment markets with the FTSE 100 enjoying 5 consecutive weeks of growth on the back of optimism surrounding the rollout of a vaccine to combat Covid-19, resulting in the best month for the index in 30 years, with a total return of 12.69%.
In this last update of 2020, we look at issues driving markets and what might lie ahead in 2021. We hope you find this useful and invite any questions you may have about how this could affect your financial plan, via:
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Growth has continued into December and the UK remains the strongest performing major stock market since the start of November.
The long-term prospect of a return to normality and reduced political uncertainty saw US markets reach new record highs, with the Dow Jones index topping 30,000 for the first time. However, uncertainty surrounding when we will return to normality is preventing markets from pressing ever higher as cases of the virus reach record levels and confidence is capped.
Brexit
Away from coronavirus, Brexit has returned to news headlines. Although the UK has left the EU, we are still bound by their rules and regulations within the customs union until the transition period ends on 31st December 2020. There appears to be a tight window in which both parties might negotiate a trade deal however with political wrangling and posturing on both sides this appears no easy feat.
This has had its most notable impact on pound sterling and its exchange rates relative to dollars and euros. When news stories suggested some compromises were being made, investors priced in the impact of a trade deal and sterling appreciated. As no-deal became a more real possibility, sterling depreciated. Whilst the outcome of the Brexit negotiations remains uncertain, we expect volatility within currency markets to remain high.
Looking ahead
A rise in investment markets in the run up to Christmas is commonly known as a Santa Rally. With the virus at record levels impacting confidence, Christmas might have come early for markets with the near record setting growth in November. Whether there are further gains this year depends largely on the whether the market is focused on the current short threat of the virus or the longer-term optimism that we may return to normality soon.
2021 is lining up to be an interesting year for investment markets. Joe Biden will take office in January, Brexit might be past tense, and the vaccine will continue to be rolled out to combat the virus. Whatever awaits us, what is important for your investments does not change. By remaining diversified across a range of different assets, we reduce the impact of any market falls and take advantage of any opportunities that arise. This is fundamental to our investment process at Vesta Wealth and allows us to manage your money at an appropriate level of risk for you.
Invitation
If you would like to discuss anything in this update, please contact your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England. Note that the information in this market update represents the views of the Investment Managers at Vesta Wealth Limited at the time of writing, which may change.
t: 01228 210 137
This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.