I hope this finds you warm, well and looking forward to a restful Christmas.
With most of us facing some pretty strict lockdown rules, it’s certainly going to be a strange one for many.
For me this means rolling up my sleeves and cooking my own Christmas dinner for a change, which I’m hoping will be more Nigella Lawson than National Lampoon…
Whilst the pandemic and global shutdown have left the global economy battered and bruised, Coronavirus vaccines have been approved and are being rolled out across the UK and US, with the world set to follow. Hopefully this marks an end in sight and hope of a return to some sense of normality by summer, both in terms of restrictions to daily life and the economy at large. As we look towards the New Year, there are certainly reasons for optimism.
UK headlines this week have noted a new strain of coronavirus infecting hundreds in some areas. While understandably scary, we should remind ourselves this is not surprising. Viruses exist because they mutate and there is little to suggest this new strain will be resistant to vaccines. Crucially, vaccine researchers do not seem especially worried at this stage, given that new vaccine methods can potentially adjust relatively quickly to new versions of the virus.
Over the pond in the US the remarkable Trump era of politics draws to a close. For investors there were plenty of positive aspects of his presidency, with tax breaks and an ‘America First’ policy fuelling a major growth story for the US economy and investment markets. However, whilst a Trump presidency may have been good for many domestic businesses and the US stock market, it often wreaked havoc on the global stage. Trade wars with China, an undermining of relations with the EU and withdrawal from the Paris Climate Agreement all greatly upset the balance of an increasingly globalised world economy that had been gradually developed over the decades since the 1980s.
Whilst not without it’s own challenges, a Biden presidency comes with an undoubtable improvement on the last four years when it comes to foreign policy and international relations. Trump’s erraticism on the world stage made it impossible to predict where negotiations of any kind would end up, or what damage would be done along the way. Even if policy itself does not change too much, the mere fact of having a less incendiary president will be a plus for markets, whilst also potentially supporting a return to more progressive environmental policies.
In the UK meanwhile, whilst the final strokes of Brexit negotiations with the EU have yet to be resolved, it still seems like the stakes are too high and the barriers too low for Britain and the EU to not reach some form of trade deal before we crash out on 1 January. Even if we don’t, the point remains that – for better or worse – the Brexit drama is in its season finale. Whatever the outcome, businesses will be able to gain more clarity over what the future looks like, which will be a huge source of relief for many.
Even if the UK exited the EU without any trade deal, and fell back onto World Trade Organisation (WTO) terms, it is likely that at some point, trade negotiations would start again, this time with a clean slate. Whilst the press are touting a no deal Brexit as an unmitigated disaster and portent of doom, it is worth remembering that WTO rules simply put us in the same position as other world trade partners. So whilst a trade deal is preferential, the alternative - whilst destabilising - would still give us the potential to reshape our relationship and trade on our own terms with the EU.
All of this means more potential volatility for markets and investments in 2021, but also potential for upside if economic stimulus takes root and restrictions to trade (both Covid and Brexit) begin to ease. When the New Year arrives I’ll be writing a piece looking at how our client portfolios performed in 2020 and giving some commentary on the outlook for the year ahead. In the meantime investors can rest easy that despite the market crash in February and March, portfolios have overall performed well in 2020 considering the circumstances. The jury is out on whether we will see a ‘Santa rally’ in the final days of the year, but if we close 2020 even as we stand today, I’ll be one very happy adviser.
On that point I’ll close for now on what will be the final bulletin of 2020. Before I do, I’d just like to say a big thank you to all of our clients for your support during a very unusual year. The same also goes for our amazing team, who adapted to a very unsettled working environment with aplomb and worked exceptionally hard to keep things at Wetherall’s running smoothly.
Wishing you and yours a very Happy Christmas and all the best for 2021, whatever it may look like.
Kind Regards,
James Wetherall
Managing Director
