As I sit down to write this newsletter, the first thing that occurs to me is that one month from today is Christmas Day and I start to reflect on how this year has passed. Time is such an illusion as we know! Looking forward to something nice will ensure that it is slow in coming and yet something you dread, will happen in a flash!
So where does that leave 2020 – in some ways it seems to have been a very long year and now with more positive news on several fronts, it gives a glimmer of hope that where 2020 became progressively negative as the year wore on, perhaps 2021, will reverse the trend and become progressively more positive.
There are, I think, a growing number of reasons why this might be the case. The obvious one is the news that we now have 3 potentially effective vaccines which are simply awaiting regulatory approval before they start to roll out for use, hopefully this side of Christmas and there are many other vaccine projects being worked on as well.
I don’t profess to understand the science, but it would seem all three solutions to date have concentrated on making a protein that is unique to the virus and once our cells make copies of the protein, they then set about destroying the virus and let the immune system take over. This is somewhat different to other forms of vaccine which in the past have injected a small dose of the virus to enable the body’s immune system to build a resistance to it. All clever stuff and I purposely avoid asking the question – how do they do that? In the same way that we don’t need to know how a computer works to be able to use it successfully, we don’t need to know how the vaccine works, but if they really can be 90% effective, then I think 2021 will indeed see some significant steps in minimising the impact of the virus going forwards and letting some semblance of normality re-establish itself.
If this happens, there will be a large number of knock-on effects, most of which should be very positive for the travel and leisure industry in particular and the economy in general. Hopefully the focus can then shift to repairing the damage done by addressing the unemployment situation and getting people back to work.
One thing is certain, it won’t be a quick fix but rather a progressive and sustained improvement that we can look forward to.
Another hurdle that seems to have been knocked down at last is in the US, with Donald Trump, albeit reluctantly, accepting at last that the handover to Joe Biden has to take place although we should remain suspicious of his motivations in pursuing his many legal actions which still have to run their course.
As Biden starts to build his team though, we are already seeing signs of relief in the markets and if he is correct when he says that America will return to a role of leading the world rather than isolating from it, this should bode well for concerns about the environment and the impact of climate change – it has already been suggested that one of Biden’s first acts as President will be for the US to reinstate its place in the Paris Accord, which will I am sure be well received.
Another factor as we move into 2021 which will be in the headlights will be the all-embracing subject of ESG – (Environment, Social and Governance) with increasing emphasis being placed on corporations to improve their record and adopt more appropriate Board Room decisions to help to shape the future.
From a regulatory perspective, Europe wide legislation in 2021, which the UK will also adopt, will require us to emphasise and discuss ESG and individual attitudes which may indeed have an impact on some of the investment solutions that are in place. Already, we are seeing Fund Managers making determined efforts to ensure their funds are indeed ESG friendly. The good news is that 25 years ago, when socially responsible and ethical investing were in their infancy, there were only a few funds to choose from. Thankfully today and increasingly going forwards, these aspects will become the norm.
This I am sure will be reflected in the “winners & losers” of market recovery and which Companies and funds prosper – it will be interesting to see how this unfolds.
So, we now have a Covid solution in sight and the US Election is behind us, it is just the Brexit trade discussions we need to see concluded and then we really should be able to look forward to some sustained market recovery. We have already seen the US markets hit all time highs this week, but we also need the UK to catch up. Arguably, the UK market, which has been out of favour for several years now, has most to catch up but it is just possible that this will bet set in motion very soon now.
We may not be out of the woods yet, but I think the time has come when we can be quietly optimistic about the medium and longer term, which doubles the reasons to stay vigilant in the short term.
As always, stay safe and we will keep in touch.
Best wishes.Richard, Chris & Lesley