We hope this finds you well. Since the announcement on Saturday, we have been working to make arrangements to ensure the company remains fully open and accessible to you during the new lockdown using our contingency plans. You can continue to get in contact with us in any of the usual ways you would, with the exception of a visit to one of our offices for now – however, we can virtually connect with you to carry out face to face conversations, just as we did during the first national lockdown. We would like to reassure you that we are still here, monitoring your investments and ready to work with you to achieve your goals.
In market news, equities saw a rebound on Monday, as investors sought out bargains following last week’s falls, which had been the weakest weekly performance for global equities since March. Technology stocks rose but lagged the broader market gains. However, despite notching up daily gains on Monday of between 1 to 2% across global indices, this has only partly recouped the circa 5% falls from last week.
US election campaigning draws to a close
The long wait is over. US election day is finally here, but anyone hoping for an early result will be holding their breath. In the final days of the campaign, President Trump has used stark terms to threaten legal action to stop the counting of postal ballots arriving after election day on 3 November, a process that is allowed with earlier post-marks in some US states. Speaking about Pennsylvania, Trump’s claim that “we’re going in with our lawyers” as soon as the polls close later today will do little to sooth investors’ nerves of an orderly political process and transfer of power should it come to that. Meanwhile an update overnight from the US Elections Project has a tally of 99.6m Americans having now already voted before today’s 3 November voting, equal to 72.3% of the total votes counted in the US 2016 election.
What to watch on US election night, but caution on hoping for an early result
There are as many as a dozen or so ‘swing states’ to watch in the US election, which are states that historically have been closely divided politically. These include Florida (which has 29 electoral college votes), Pennsylvania (20), Ohio (18), Georgia (16), Michigan (16), North Carolina (15), Arizona (11), and Wisconsin (10). Some US states, such as Pennsylvania and Wisconsin, cannot start processing and counting early votes until election day, so final results here are less likely on the night. Instead, a lot of focus will be on Florida, a so-called ‘bellwether state’, which has a well-established process for counting early votes. Since 1996, every presidential candidate who has succeeded in Florida has gone on to win the White House. Also worth keeping in mind is caution on reading an early result, as both Florida and North Carolina announce their postal votes at the outset but vote totals can then be skewed as on-the-day ballots are counted. Safe to say, it could be a long night and week ahead.
With economically sensitive stocks seeing some support on Monday, a popular narrative is that a US election Democrat ‘blue wave’ would unleash a wave of infrastructure and broader government spending. So the thinking goes, this would support reflation hopes and drive interest into the more unloved parts of the market, including value and cyclical sectors. However, pushing back against this view, the market’s medium-term inflation expectations remain stubbornly muted. The US Federal Reserve tracks 5y5y forward inflation expectations, which is a measure of expected inflation on average over the five-year period that begins five years from today. Currently this rate is pointing to a medium-term inflation rate of just 1.82% – that’s below the Fed’s 2% target, and also below where it was at the start of 2020. Despite the unprecedented policy support so far this year, the accommodation from governments and central banks has not boosted net inflation expectations, but instead offered more of an inflation ‘bridge’ over deflationary risks. Should Biden take the White House this week, a large fiscal stimulus would likely follow but some of this might simply find itself netted off against a government more willing to curtail economic activity as the Democrats have promised to ‘follow the science’ and make dealing with the pandemic a policy priority.
The link below will take you to the latest short video, released last night, from Lothar Mentel, Tatton’s CEO and Chief Investment Officer, in which he discusses the US election, the response to the pandemic and Brexit.
As always, if you wish to discuss any aspect of your portfolio with your adviser, please do not hesitate to get in touch.
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