• Charles Heighton

A record-setting November – but investors are overly optimistic



By Charles Heighton – The London Financial Markets Editor and VP of Trading at King’s Global Markets


Global stock markets are set for their best month ever with only one business day left to go. It has been a whirlwind of a month with the US election and a plethora of vaccine news. In November, $89 billion has been injected into equity markets by investors; according to Bank of America, this is a record level of monthly investment.


The biggest factor for this month's massive bullish run has been the vaccine news. Coronavirus still grips the hearts and minds of some of the biggest countries in the world, although other elements are also important. President Trump has toned down his rhetoric regarding a stolen election and seems prepared to step down in January. The long-drawn-out stimulus talks in the US and the Brexit negotiations in Europe have fallen into the background, but it is unlikely that they will stay there long.


Three vaccines had data released this month with varying levels of success. The Pfizer-BioNTech and Moderna vaccines were the most positive, showing efficacy rates above 90%. The AstraZeneca and Oxford vaccine was slightly less successful but still appeared 70% effective. Although some concerns regarding this study have been noted.


Investors have loved this vaccine news, but they are firmly living in the future, as stock markets supposedly do. It is debatable whether markets have gone too high too fast, completely ignoring case numbers that are climbing in several key countries. This optimism may also be a little premature. The estimates for herd immunity state that we are currently just over halfway through this pandemic with eight months left to go. That is a best-case scenario. None of these vaccines meet the viability criteria of the World Health Organisation because they require two doses and some are hard to store. This timeline is also only in wealthy countries; a vaccine rollout across the world will take longer and the divide will in part be based on those who can pay.


I would urge caution; this has never been done before. No vaccine has been made and rolled out so fast. Yes, November has been filled with good news, but this crisis is far from over. The market volatility of 2020 will probably continue for a few more months. The early signs are positive but there is so much that could still go wrong and even if it does not, we could face eight more months of possible lockdowns and restrictions. That is not an opportunity for the economy or companies to thrive. Inevitably, this news would cause stocks to rally, but 14% in four weeks is bold in the middle of a pandemic that is far from over.


Sources:

https://www.ft.com/content/530e3c1c-306d-42e1-9f8c-33a2dc7af82a

https://ritholtz.com/2020/11/halfway-point/


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