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Market update November 2020: US Election, COVID vaccine and rate cuts Posted on November 13, 2020
The markets have responded positively in recent weeks to the US Election results and advances in COVID-19 management options.
In regards to the US Election, the prospect of a divided government will be welcomed by the market. With a Democrat in the White House and a Republican Senate, Biden’s proposed corporate and High Net Worth tax reforms will be difficult to pass.
Trump may attempt to rush through further stimulus while he is still President (before 20 January 2021).
The Reserve Bank of Australia cut interest rates to 0.1% last month. If and when this is passed on to consumers via the banks, consumers will buoyed by the easing pressure and may be encouraged to spend.
COVID-19 trends and more confident talk around the production of a vaccine has boosted the market. While case numbers continue to rise in the US, UK and Europe, medical systems have had time to prepare, and a more targeted approach to lockdowns poses less threat to the economy.
Pharmaceutical giants, Pfizer/BioNTech, and AstraZeneca in partnership with Oxford University, have announced a COVID-19 vaccine production timeline and trial here in Australia.
One risk to be aware of is mutation of the strain – which has happened in Denmark already – in which case, the current vaccine would not work.
Another risk to watch is the trade friction with China. Some food, wine and commodity items are threatened.
We do anticipate some challenges ahead with recovery from the global economic impact from COVID. The road will be bumpy, but not without the occasional tick up from influences worth watching, including:
- Federal Government fiscal stimulus
- State border openings
- Strong local appetite for domestic travel and lifestyle
- Further stimulus from the RBA.
2020 has been a year of caution for existing investors, but for many Australians, it has been an appealing time to enter the market for the first time. The share market can be like a mine field if you are unfamiliar – it’s important to stay informed and fluid. Whether you’re a current investor or thinking of dipping your toe in the market, feel free to give us a call for a complementary consultation 4320 0500.
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