Third Quarter 2020 Review & Outlook

Third Quarter 2020 Review & Outlook

Executive Summary

2020 has been a brutal one so far in all aspects of life. Covid 19 continues to dominate the news with the added complexity of a Brexit Trade Deal to be finalised and a US election to be completed by the end of the year. Despite these factors global markets have rebounded. Our main funds have bounced back from an April low:

Only the UK fund is dragging its heels, due mainly to our reliance on the financial services sector and the uncertainties surrounding the Brexit deal. Expect more market volatility in Q4, but we, and our investment partners, project a strong and stable market for 2021 cementing the true start of a Bull market (rising market).

Investment Q4 Outlook

Covid 19 continues to dominate our thoughts and conversation. The second wave of the virus is getting its grip on Europe with further local and regional restrictions imminent. With a widespread vaccine being predicted for the middle of 2021 it is clear there will be some further hurdles posed by Covid 19. From an investment perspective this was priced into the market some months ago, hence the second wave will not have the impact it had on markets in March.

The Brexit trade deal, much like Covid 19 was also priced into market and is a factor in the performance of UK equities in 2020. The UK equity market has not seen the recovery that US & EU markets have seen. This is in part down to the uncertainty over the Brexit Trade Deal. Markets expected there to be a stalemate in Q3, as in previous negotiations neither side appear willing to change their position until the last minute. Markets expect a ‘late in the day’ agreement to be finalised that will provide a boost to UK equity markets.

The US Election result has historically always seen a rally in investments markets, no matter the President. This is because markets move on probabilities, not possibilities. The same is expected after this US election, but with the slight caveat of a delayed market reaction. This is mainly because of the uncertainty over the result. Donald Trump testing positive for Covid 19 could in the worst case see the election date delayed by a few weeks. In the event the election goes ahead on 3rd November there is likely to be some recounts of ballots or even brief legal challenges to the result from both sides which may mean the historical movement seen post a US election may be delayed by a month.

The investment markets are showing signs of an early bull market. This means positive returns are around the corner. The growth in late Q2 and early Q3 followed by volatility in the form of a correction are all positive signs.

There is no doubt 2020 will go down as one of the toughest years in most of our lifetimes from a social and economic perspective. Despite this we have been impressed with the way in which our investment portfolios have adapted and performed in such conditions and the outlook is very positive.

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