Market Update – 03 Nov 2020

“The land of the free and the home of the brave”

America goes to the polls today and the world awaits the outcome.  Will the Donald produce another shock result or will the old man of US politics finally get his chance?

Reading all of the commentary, it seems as though a nation is underwhelmed.  America needs a strong leader more than ever with the nation in the grip of a pandemic, the economy stuttering, social unrest and party politics to the fore. While the polls have Biden ahead, it’s still the swing states that will decide the election and with the bottom of both the US Presidential tickets arguably stronger than the top it’s a waiting game.

And it’s not just the Presidential election that will impact the markets but the Senate election could also be crucial for the markets as many key policy shifts including further fiscal stimulus hinge on who holds the majority control.

“The world is still largely in a holding pattern as investors await clarity on the U.S. election,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “The world will likely be a lot clearer in just a few days thanks to the election being over, stimulus talks resuming in Washington and further central bank support.

And the last week has shown just how much the global economy needs a strong US, rising Covid numbers across the globe, European concerns with Brexit and the uncertainty of the US election saw markets fall heavily last week.

So we await an outcome and we hope that the only fireworks that we will see will be on 5 November but it’s a sad reflection of the times we live in that the major cities in the US started boarding up shop fronts yesterday in the event of riots in the streets following the election.

At home it’s lockdown, either tiered or total, it’s a country divided as ministers,  both Prime and First come under increasing pressure, from colleagues, mayors, business and the public with the big decisions they’re making , scrutinised like never before.

And markets have reacted and will continue to react

Asia; the markets have risen on the back of the string Chinese economic data but with the US election and Covid-19 weighing heavily on investors’ minds it was marginal.

UK; the FTSE 100 had another rocky session  as investors balanced the impact on shares of the new England-wide lockdown with hopes Boris Johnson can get a Brexit trade deal signed in the coming weeks.

Company bosses from retail to hospitality and property called on the government to offer more support for businesses as they grapple with the implications of being closed for another month.

The clamour for an extension of the business rates holiday grew deafening this morning as chief executives said the month long furlough extension was not enough to keep their businesses, and payrolls, alive.

US ; it’s all about the election Trump and  Biden in the final stage of campaigning,  visiting the key swing states, Biden has been ahead in the polls for weeks, investors are acutely aware that in Pennsylvania and big southern swing states, the Democrat contender’s lead is not big enough to make a Trump win impossible.

The president will be hoping that he can win over enough of Pennsylvania’s large proportion of white working class voters to squeak a victory, while Biden will be campaigning hard to win the hearts and votes of suburban, educated women who seem to be switching from the Republican party this time.

Europe; November’s trading started positively as the accelerating Chinese factory activity helped outweigh concerns about a second wave of COVID-19 outbreak that drove major economies back into a lockdown. The trade-reliant German DAX rose 0.3% on Monday after a private business survey showed activity in China’s factory sector accelerated at the fastest pace in nearly a decade in October. France’s CAC 40 and Spain’s IBEX rose marginally after last week’s sharp losses.

But this week it’s all about the US and whatever the outcome of the election there is work to be done and is there a lesson in history?

Sixty years ago John F Kennedy said “ If we cannot now end our differences, at least we can make the world safe for diversity”  as true today as it was then.

Stay safe