z-kolkiemz-kolkiem

December’s investment market commentary

December was another strong month for investors as riskier assets continued their rise, given the good news offered by the COVID-19 vaccines, as Andrew Yeadon’s update explains.
Share on facebook
Share on linkedin
Share on twitter
Share on email
Published 7 January
3 mins

December was another strong month for investors as riskier assets continued their rise. This was driven by the encouraging start of COVID-19 vaccinations in the UK, US, EU and other parts of the world, as well as the passing of the second virus-linked stimulus package in the US and extraordinarily supportive central bank policies. Meanwhile, the eleventh hour Brexit agreement, reached by the UK and EU, allowed both sides to avoid a destructive no-deal, hard scenario.

Despite the recent resurgence of COVID-19 infections in many parts of the world, markets seem to be willing to look through the short-term disruption it has caused and, instead, focus more on the path back to normality. However, as more lockdowns are imposed, partly due to the new and more virulent strains of the virus discovered in the UK and South Africa, economic data in Europe and the US has continued to come through weaker than expected, forcing central banks to maintain support for the foreseeable future.

Brexit was never far from the headlines as negotiations continued frantically throughout December. With time quickly running out, tensions between the UK and EU rose further as leaders in Europe ordered a complete blockade of UK goods and services, for several days, in an effort to stop the new UK strain reaching mainland Europe. The ensuing disruption, caused by the miles of lorries queueing around the ports of Dover, seemed to focus minds and, with little time to spare, a deal was agreed. While it allows for the tariff-free trade in goods to continue between the UK and the EU, there are still many issues yet to be negotiated, among which are arrangements for the financial services sector.

Equity markets rose +2.4% as measured by the MSCI All Country World Index in Sterling. Regions with a better control of the pandemic outperformed those where infections continued their upward trajectory, with Emerging Markets advancing the most (+5.0%), followed by Asia ex Japan (+4.5%). Europe ex-UK (+2.2%) was behind the leaders, with the US (+1.8%) and Japan (+1.9%) lagging the most. The UK was somewhere in the middle, as the Brexit breakthrough became a tailwind for UK equities (+3.2%).

 

The strongest sectors were cyclicals, helped by a style rotation towards materials (+4.7%) and financial services (+3.0%), and ‘stay at home’ type businesses in IT (+4.6%), which have performed well throughout the pandemic. The weakest sectors have been those most impacted by the pandemic, with real estate (-0.3%) being the worst performing area. Utilities (+0.2%), industrials (+0.5%) and consumer staples (+1.1%) were also behind the pace.

 

In terms of style, growth (+2.8%) outperformed value (+1.9%), while smaller companies (+5.1%) outperformed larger companies (+2.2%).

Within fixed income, investors’ appetite for risk helped higher yielding corporate bonds, as measured by the ICE Merrill Lynch Global High Yield Index (+1.8%), outperform investment grade credit and safe haven government bonds, with the Merrill Lynch Global Corporate Investment Grade Index up +0.4% and the JP Morgan Global Bond Index up +0.1% (all hedged to GBP).

The ‘risk-on’ tone also boosted commodities, with the Bloomberg Commodities Index up +2.7%. Agriculture (+8.0%), crude oil (+4.2%) and gold (+4.1%) were the strongest sectors, with falling real yields pushing the opportunity cost of investing in precious metals to all-time lows. Industrial metals (-1.9%) lagged.

The Pound was stronger against most major currencies on the back of the Brexit deal with the EU. It was up against the US Dollar by +2.6%, by +1.6% relative to the Japanese Yen and by +0.1% versus the Euro. The South African Rand was an exception to this trend, with Sterling weakening against it by -2.5%.

(Notes: All monthly data is quoted in Sterling terms unless otherwise stated).

INDEXEND NOVEMBER VALUEEND DECEMBER VALUE
FTSE 1006266.196460.52
DJ Ind. Average29638.6430606.48
S&P Comp3621.633756.07
Nasdaq 10012268.3212888.28
Nikkei26433.6227444.17
£/$1.33231.367
€/£0.895190.89374
€/$1.19271.2216
£ Base Rate0.100.10
Brent Crude47.8851.8
Gold1776.951898.36

This month’s values quoted as at 31/12/2020. The above values are sourced from Bloomberg and are quoted in the relevant currency.

Clients of Nedbank Private Wealth can get in touch with their private bankers directly to understand how their portfolios are responding to market events or call +44 (0)1624 645000 and speak to our client services team.

 

If you would like to find out more about how we help manage clients’ investments, please also contact us on the number above. Or you can get in touch using the links to the forms towards the end of this page.

Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or security mentioned here may not be suitable, and is included for information only and is not a recommendation. You should always seek professional advice before making any investment decisions.

about the author

Andrew Yeadon

Andrew Yeadon

Andrew joined in 2012, following 11 years with Schroders Investment Management, where he formed their multi-manager team. Prior to joining Schroders, Andrew spent 12 years at Brinson Partners (now part of UBS) where he progressed from graduate trainee to head of European equity strategy and portfolio construction.

 

His responsibilities include heading the London-based investment team, and chairing both the International Strategy Committee and the International Investment Committee. Andrew is also part of the international investment team for Nedgroup Investments, a sister company of Nedbank Private Wealth.

Access more of our insights

Investing

The week in review

19 Jan

   |   2 mins

A review of the week of 11 January saw world equities overall down just over -1% in US Dollar and Sterling terms. Read more about the news headlines impacting financial markets.

Investing

13 January investment webinar: 2021 outlook

13 Jan

   |   40 mins

David McFadzean was joined by Andrew Yeadon to talk through what investment trends we see in 2021 financial markets, the risks facing investors, and what that means for portfolios.

Investing

What the January Senate wins mean for markets

12 Jan

   |   5 mins

In a week of dramatic events that led to the US president facing his second impeachment proceedings, the US also saw the Georgia senate run-offs decided. Rebecca Cretney explains what that should mean for markets. 

Our top 10 for 2020

23 Dec

   |   2 mins

As 2020 draws to a close, we look back and list our top 10 articles and webinars from the year. And we're looking forward to 2021 and publishing more content that we hope you will find of use.

Get in touch

If you are interested in becoming a client, please complete the form via the ‘become a client’ button below. Alternatively, if you are already a client, or if you have a question about how we help clients in particular circumstances, please use the ‘contact us’ button.


We will get back to you as soon as we can during office hours, which are Monday to Friday, 8am to 8pm (UK time), except for UK public holidays.

Become a Client

Thank you for your interest in Nedbank Private Wealth. Please call us on +44 (0)1624 645000 or complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.  Please note: If you are an EU resident, we are unfortunately unable to offer our services to you at present.

* Required fields

Contact Us

Give us a call today on +44 (0)1624 645000 or please complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.

Our office hours are weekdays from 8am to 8pm UK time, except for UK public holidays.

* Required field

Search suggestions

IMPORTANT

Beware of scams using Nedbank Private Wealth’s name.

 

Have you received an email or SMS claiming to be from Nedbank Private Wealth, inviting you to open an account?

 

Don’t be tricked – Nedbank Private Wealth never contacts members of the public directly, and will never use email or text messages to ask you for your bank details or sensitive personal information.

 

We are aware of scams using our name and those of our staff. These are usually intended to convince you to send money to the scammers, who use our name because it sounds legitimate.

 

If you are in any doubt about whether an email or SMS in our name is legitimate, please speak to your private banker, or call the telephone numbers on the “Contact us” page.