If you’re new to the concept of financial market investment, you may be inclined to avoid the majority of asset classes in the current climate.
However, while the world may be in the grip of socio-economic tumult and geopolitical conflict, this creates the type of volatility and price movements that can offer opportunities to investors armed with knowledge and a keen sense of determinism.
In this post, we’ll ask what investors should be looking at in the current economic climate, particularly as they look to navigate the markets and snatch opportunity from the jaws of disaster.
1. Brexit and the Spectre of a No-deal
Brexit appears to be a never-ending story in some respects, with the UK and the EU seemingly no closer to agreeing a viable free trade agreement more than four-and-a-half years after the referendum result was delivered.
Currently, it appears as though a no-deal exit is most likely, although both sides could decide to continue negotiation over Christmas and until the transition period ends on December 31st.
This uncertainty means that both the pound and the Euro will continue to trade within an ever-depreciating range for the foreseeable future, while some economists are arguing that the limited potential upside of any Brexit talks breakthrough will continue this trend through 2021 and beyond.
Certainly, the pound appears to have reached it’s ‘fair value’ against the dollar even accounting for the prospect of an amicable deal being reached, while it may also struggle to break through the current 1.13 barrier recorded vs. the Euro.
2. The Discovery of the Covid-19 Vaccine
One piece of good news has arrived recently in the form of the Covid-19 vaccine, with the collaboration between Pfizer and BioNTech having showcased 90% efficacy and since been rolled out in the UK and the US (amongst other countries).
This has already prompted a significant stock market, particularly amongst shares and equities that were the hardest hit by the global pandemic. This has translated into gains for firms in the fields of aviation, travel and tourism and hospitality, while high growth tech stocks such as Zoom have experienced a slight correction during the fourth quarter.
In the current market, it can also be argued that some of these stocks remain undervalued as we await the rollout of the vaccine to deliver a return to normal, creating an opportunity to buy even large-cap shares and achieve short-term growth.
Of course, some doubt remains about the viability of stocks in the near-term, even with global growth widely forecast for 2021. Certainly, it’s hard to bank on sustainable growth for certain stocks over the course of the next two quarters, with the virus and its associated lockdown measures likely to remain part of the conversation for now.
3. Biden’s US Presidency
With the Electoral College having formally announced Joe Biden as the President elect in the US, there’s no doubt that some stocks are set to soar in a robust bull market.
In fact, the three weeks that followed Biden’s initial election win were historically solid from the perspective of the stock market, especially when measured against newly elected leaders from the past.
Since election day, for example, the S&P 500 has surged by a staggering 7.7%, with this representing the second-biggest gain in 90 years. It’s also nearly triple the advance that followed Trump’s triumph in 2016, and in this respect the world’s major indexes are offering hope and opportunity for investors in the near-term.
This trend is set to continue well into the next quarter, so certain US stocks may be particularly appealing during this time.