Yesterday was a dramatic day and finally we have had some good news about the outlook for the Covid crisis. BioNTech and Pfizer have announced data from human vaccine trials and this shows high levels of protection against infection. If we get a working vaccine we can quickly develop ‘herd immunity’ without having the suffer widespread deaths. This is good news for people but it could also be very important for investments. This note is intended to give you a summary of what this means.
The hope is that this and other vaccines in the pipeline could mean a return to normality by spring 2021. It may be too early to make broad statements as to the efficacy of any vaccine but this news has focused investors on the way out of this crisis and changed psychology. The change of perception has meant that some trends have started to reverse as investors start to believe economies can bounce back. There are real grounds for optimism because large excess savings built up during the pandemic could be released and 2021 could be a strong year economically.
Yesterday the MSCI's All-Country world index rose by 1.3%. The UK's FTSE All Share was one of the strongest performers, rising by almost 5% on the day. The US S&P 500 index finished up only 1.2%. The UK market has fallen far behind the US over this year as investors bet heavily in technology but this may be about to change. We favour funds that are more heavily invested in the UK because we believe the returns from here will be higher than markets like the US.
The US Nasdaq index, which is very tech heavy, ended down on the day. Zoom, the video conferencing service fell sharply because as office workers return to work and people are able to see their families again, there will be much less demand for services such as Zoom. Similarly shares in companies like Peleton, Facebook and Tesla also fell sharply.
Covid has been a very significant factor in investment portfolios. The economic pressure has depressed certain investments whilst driving some to much higher prices. It is essential we look at the medium to longer term to try and improve returns but also to manage risk.
Flying Colours Life Investment Management aims to make investment management more accessible and transparent for clients. Our roots in investing money on behalf of our clients, and our motivation lies in a genuine desire to make a difference to people’s futures and maximising the potential for solid long-term returns.Let's start a conversation