16 October 2020
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Welcome to our weekly newsletter, where the Manager summarises the key market developments over the last seven days.

The Noise

Boris Johnson announced a new three-tier system of regional Covid-19 restrictions on Monday following cases reaching over 12,000-a-day. Johnson has not ruled out going further in his restrictions, but told the House of Commons that the policy ‘could bring down the virus’. Every area of England now falls into three categories - medium (Tier One), high (Tier Two) or very high (Tier Three), depending on the local rate of infection with Liverpool being classified as Tier Three and London due for Tier Two this weekend.

Joe Biden has surged ahead in the national polls in the race for the US presidency. Although Hillary Clinton led in the polls all the way to election night, the electoral college system in the US sees certain states have disproportionate impact on the result. In eight states that flipped from voting for Obama to Trump in 2016, Biden leads in six (Florida, Pennsylvania, Michigan, North Carolina, Arizona and Wisconsin) with Trump continuing to hold Iowa and Ohio. It remains to be seen how accurate the poles will be, given their shambolic record in 2016.

China has recorded strong growth in trade while other major economies continue to struggle with the impact of Coronavirus. Exports in September rose 9.9%, while imports grew 13.2%, according to official data. The data suggests a rapid recovery in China from an initial reduction in overseas orders sparked by the pandemic.

The Numbers

GBP Performance to 16/10/20
1 Week
Absolute Level
Equity GBP Total Return (MSCI)





Europe (MSCI Europe)








Japan (MSCI Japan)




Emerging Markets (MSCI Emerging)




Fixed Income GBP Total Return

UK Government (Barclays Sterling Gilts Index)




Investment Grade Hedged (Barclays Global Aggregate Corporate Bond Index)




High Yield Bonds Hedged (Barclays Global High Yield Index)




GBP Performance to 16/10/20
1 Week
Absolute Level
Currency Moves













Commodities GBP Return

Gold (in £)




Oil (in $)




Source: Bloomberg, data as at 15/10/2020

The Nuance

Markets were mixed this week, with the US buoyed by political promises of fiscal (and more monetary) support, whilst the UK grapples with a significant uplift in cases and measures to flatten the curve. Although the fog of uncertainty has thinned since March, the economic outlook, both in the short and long term remains weak.

Coupled with this, return prospects for lower risk or diversifying assets have been driven down towards zero and constructing portfolios which minimise short-term volatility has become increasingly expensive. Government bonds traditionally protect portfolios when equities fall, however, when yields are close to zero or negative, this correlation breaks down. The Manager is currently examining its portfolios to see how it can mitigate for this and enhance yields in a risk-controlled manner.

It is likely that markets will have false starts and suffer bouts of fear as news headlines buffer markets, but these pull-backs should be used as buying opportunities. The Manager is now looking to Q3 earnings season to give a glimpse of corporate health. Whilst being wary of companies which rely on US consumer spending or businesses that sell to US consumers given the potential for USD weakness, theManager continues to prefer resilient companies which are cash generative, profitable and less dependent on the economic cycleto deliver results.

Quote of the week

“Rethink. Reskill. Reboot.”

The UK Government

The Government’s now infamous ‘Fatima’ campaign urging ballet dancers to retrain as IT workers was widely mocked this week. The jokes wrote themselves as thousands on social media lambasted those at the top of UK politics, suggesting it was them who should in fact seek alternative employment. Whilst the idea of Nick Cummings moonlighting as a Barnard Castle tour guide has a certain ring to it, the stark reality is that Britain’s vibrant art scene supports hundreds of thousands of jobs that are now on life support. Culture Secretary, Oliver Dowden’s promise to invest a further £1.57 billion into saving the arts rang hollow in the wake of another ill-conceived message on the part of the government.

Source: Sanlam Private Wealth

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Sanlam Private Wealth is a trading name of Sanlam Private Investments (UK) Ltd.

Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.

The information and opinion contained in this market view should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy. Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness by Sanlam. Any expressions of opinion are subject to change without notice.

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