INVESTMENT UPDATE

Monthly Investment Review for November 2020

  • 13 November 2020
  • 5 mins reading time

Equity

Equity prices surged across Europe and North America in November, spurred by positive news of prospective vaccines for the Covid-19 virus. UK stocks managed to recoup some of the losses registered during the pandemic but, in general, remain at lower prices than their American and continental European counterparts. The spectre of a no-deal Brexit also continues to haunt UK investors but, during November, a deal seemed more likely than it had for many months.

Other news included falling contagion rates in several European countries, and the confirmation of a clear winner in the US presidential election. Therefore, investors were adjusting to a potential return to normality in 2021. That drove oil and mineral prices higher on anticipated higher demand. It also helped banks, travel and leisure companies to pare stock price losses that they had incurred since the beginning of the year.

At the same time, the improved economic outlook helped to reduce demand for perceived “haven” investments, such as gold and the US dollar. The lower value of the dollar is particularly good news for companies and governments across emerging markets that have borrowed in dollars; the lower the value of the dollar, the lower their debt burden. This added to a relatively successful response to the pandemic among some Asian countries, lifting stock prices and hopes that evidence of economic improvement would be revealed fairly soon.

Bonds

It was a volatile month for bonds. The demand for and prices of lower-risk rated government bonds, such as those of the US and of the European Central Bank, fell across the month as a whole. But that came after a fair amount of ups and downs as investors digested mixed news about the US election result and vaccine progress.

Corporate bonds had a more consistently positive month. The demand for and prices of them rose as investors calculated that the improved economic outlook would help to support companies’ abilities to meet their debt obligations. This helps to reduce the perceived level of risk associated with those bonds.

Commodities

As mentioned above, the prospects for increased economic and industrial activity led to higher expected demand of commodities, and that pushed oil and metal prices higher. The notable exception was precious metals, such as gold, the demand for which fell as their perceived “haven” status became less sought after.

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