Equity markets staged a V-shaped rally last week in the wake of their sharp correction in late October, encouraged as the US presidential election went smoothly ahead on 3 November. At the same time, many companies reported better-than-expected earnings, and economies continued turning the corner. On a global scale, equity markets recovered by 7% despite the worsening Covid-19 pandemic. Nasdaq even surged by 10%.

The official proclamation on 7 November that Joe Biden had won the election, after a lengthy counting of votes, has not halted the party atmosphere in equity markets, even if Donald Trump has not yet conceded and is threatening legal action left, right and centre. The split Congress is seen in a positive light. Indeed, the ‘blue wave’ – in which the Democrats would have taken control of Congress as well as winning the White House – did not happen. If the Senate retains a Republican majority (pending the result in Georgia), it will be difficult to force through major legislative changes. For the time being, this is welcomed by investors, who believe that any increases in corporate tax will be blocked. As far as relations with China are concerned, the trade war is not necessarily going to end as it started even before Trump took office. But communication channels are likely to be more open, with rounds of talks centring on mutual benefits. Moreover, foreign investors had strongly increased
positions in Chinese shares ahead of the election.

The US employment figures released on 6 November were cheered by investors. In October, the unemployment rate fell from 7.7% to 6.9% and private-sector job creation clocked in at 906,000. The figure for all sectors combined totalled 638,000 versus the consensus forecast of 600,000.

The UK economy looks set to contract even further in the fourth quarter amid new virus-related restrictions and the Brexit process. The Bank of England last week boosted its asset-purchasing facility by USD 150bn to USD 800bn between now and the end of March 2021 to bridge the gap in household and corporate funding. Meanwhile, the US Federal Reserve is due to maintain low rates as long as inflation does not exceed 2% and will continue purchasing Treasury bonds. Interest rates are set to remain low for a long time, which reinforces the ‘Tina’ effect (‘there is no alternative’), driving the valuations of risk assets and growth stocks ever higher.

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