Good test results for the corona vaccine from various suppliers led to a recovery rally, especially for the former corona loser stocks. The insurance sectors, tourism stocks, banks and, regionally, mainly european stocks were the main beneficiaries. Emerging market stocks continued their strong trend and reached new highs for the year. The long-awaited result in the race for the US presidency, which Joe Biden won, also had a relieving effect. However, the "blue sweep" previously expected by many failed to materialise and the senate will most likely remain republican, which should leave the new president little room for far-reaching reforms or tax increases. A new fiscal package is nevertheless likely to be put together, as neither party wants to bear the responsibility for a renewed economic slowdown and the private households that have fallen into difficulties. There is also cross-party support for further support measures. Economic data published with some delay continued to deteriorate, partly because of the further increase in corona cases and the associated curtailment measures. Cyclically sensitive commodities such as oil or copper suggest that the coming economic data could possibly surprise on the upside again in the coming weeks.
The vaccine news caused a big rotation (see FOCUS) from the previous corona winners to the corona losers. European indices as well as small cap stocks recorded a record rally on a monthly basis. Despite the record, most European indices are still trading significantly lower than last year. The question is whether the rotation is sustainable or merely a catch-up effect. We are not yet fully convinced that value stocks should be overweighted in portfolios after the strong price gains. We intend to buy selectively in weak phases. A vaccination of the world population should bring growth back to trend. In 12-24 months, we would then be back in a pre-pandemic environment. This environment was characterised by low interest rates and slow growth. Relatively strong growth stocks had an excellent environment even before the pandemic and could continue to be among the winners in the coming months. The Nikkei 225 jumped to a new multi-year high in the month under review (since 1991). We have long considered Japanese and emerging market equities to be attractive and we remain invested in these markets.
Monetary policy remains a constant. The accommodative policy of the major central banks will not change in the coming months. In the US, the Federal Reserve is rather concerned about the slow pace of negotiations on new fiscal spending and the rising corona case numbers. Although vaccination now seems within reach, many months will pass before the population is vaccinated. Interest rates have therefore changed little in November, despite the positive vaccine news.
Thanks to rising prices for raw materials, the Norwegian krone, the Australian and the New Zealand dollar were in great demand. The USD against the CHF remains unambitiously above the 0.90 mark. The good news made EUR/CHF rise above the 1.08 mark again. Gold lost a lot of its lustre with over -5% and is trading at an interesting support level for the years 2012/2011. Oil, on the other hand, recorded a price gain of around 25% and the price of copper closed almost 13% higher.
The pandemic will continue to cast a shadow over economic activity as long as vaccination coverage has not been achieved. Early vaccination of at risk groups is certainly a priority and would allow states to gradually lift the harsh restrictions. The US elections did not bring any unpleasant surprises and many uncertainties have been removed. Investor sentiment has improved accordingly - i.e. many investors are now more confident and fund managers hold little cash. We maintain our constructive outlook and remain overweight in equities accordingly. However, the aforementioned optimistic mood of the investor community could lead to corrections in the medium term, which should, however, quickly meet with buyers. To guard against negative surprises, we have implemented partial hedging via put spreads. These can be bought cheaply thanks to falling volatilities and provide the necessary protection in the event of further disappointment.