A quarterly market update from Acumen

With the announcement of vaccines last November, the world has been poised for a strong recovery from the economic damage instigated by Covid-19. The markets price in the good and the bad, the aggregate of which becomes the market price. The difficulty is this is often priced ahead of time, so what’s happening in the markets today is often a reflection of 6–12-month expectations. This is why employment figures might seem dire, but the market increases anyway.

That being said, domestically, we have a lot to look forward to. Brexit is finalised and we have the return of certainty in that respect – businesses dampened by ‘ifs’ and ‘buts’ will finally have some solid guidance to work from. No matter what the deal was, or even if there was a deal – just getting through Brexit was a sigh of relief to many of us.

Our Covid-19 vaccine roll-out seems to be well underway with the expectation that every UK adult will be offered a vaccine by July. This will hopefully bring the R-rate well under control and allow the reopening of the hospitality and holiday industries I know we have all been missing.

The White House has a new man at the helm, someone who is potentially less volatile than the previous occupant. As previously touched upon with the notion of Brexit, the markets like certainty. One thing they can be certain is that “Sleepy Joe” is unlikely to be as volatile as “Agent Orange” – and for that reason alone the markets will like Joe Biden more than Trump.

Across the world, we have seen the mass injection of financial stimulus geared towards propping up the economy and driving interest rates through the floor. The idea being that loans made to both companies and individuals will be easily serviceable and therefore highly leveraged businesses are less likely to fold under the additional economic stress brought on by the pandemic.

The opposite effect of the stimulus is that equity prices are booming to unprecedented levels – US equities are now 15% higher than their peak before the crash last year (S&P 500). The market returns are good, but they are helped by trillions of dollars of stimulus and carried solely by a few large tech companies.

The UK is finally looking significantly more attractive with Brexit and Covid-19 which have caused some of the best opportunities for arbitrage and value an investor could ever hope for. Of course, we don’t have a crystal ball and we certainly don’t know what is going to happen next, but in terms of bargains to be found – the UK is a very interesting place to be.

For advice on your investments, contact Acumen Financial Partnership.