A strange quirk of investing is that sometimes good news is seen as bad news and February provided a perfect example of this.
It has been a subdued start to 2021 (and not just because of dry January). The emergence of new, faster spreading variants of COVID-19 is providing a dose of reality that we are not returning to a normalised environment anytime soon.
Brexit and COVID-19 were the key market drivers for the final month of what has been a historic year, for markets and the real world alike.
The dominant theme in November was the successful trials of COVID-19 vaccines. The announcements by Pfizer, Moderna and Astra Zeneca turbocharged markets and led to some of the strongest monthly returns for stock markets on record! The MSCI World Index posted an exceptional 12% rise in November, coming close to matching the best ever monthly return for the global stocks benchmark. European and UK stock markets were the strongest performers.
Like the weather the investment backdrop in October was largely gloomy and unsettled, with some of the biggest stock market falls seen since spring. The MSCI World Index fell by 3.0% with UK, US, European and Japanese markets all in negative territory.
It is no surprise that the COVID-19 pandemic has continued to dominate the backdrop for investment markets over the past quarter. However, a sense of calm has been restored following the extreme market moves during the first half of the year. The MSCI World Index posted a healthy gain of more than 6% in the third quarter, but unfortunately things were more gloomy in the UK where the main stock market index fell more than 4% in the period.
Investor sentiment turned negative in September with fears that the economic recovery will be derailed by a second wave of COVID-19. Political uncertainty provided another reason to unsettle investors with new concerns over a no-deal Brexit continuing to weigh on sentiment for UK stock markets in particular.
August is typically a quiet month for markets with the holiday season in full swing and little economic or corporate news-flow to influence investors. But 2020 is not a typical year and global investors remained in ‘risk-on’ mode pushing share prices higher with the global stock market benchmark MSCI World index rising 6% - it’s best August for over 30 years.