Market Review - November 2020
How the different asset classes have fared:
Markets rebounded strongly over November due to a number of factors including RBA cutting interest rates to a record low of 0.10%, its announcement of the $100bn quantitative easing program, Joe Biden being declared the winner of the US presidential election and positive news regarding COVID-19 vaccines (Pfizer and Moderna).
On 3rd November, the RBA cut the official cash rate from 0.25% to a record low of 0.10%. In addition, it announced a $100 billion quantitative easing program. These actions show the RBA’s unprecedented stance to provide support to the Australian economic recovery and bode well for the domestic economy. The ASX saw a sharp rally following the announcement.
After several days of uncertainty, as the US counted postal votes, Joe Biden was announced as the winner of the US presidential election. The results are usually clear on the night of the election, however, as millions of Americans casted their votes via post due to COVID, there was a delay in the announcement of the winner. This delay created scepticism amongst Trump supporters; paving the way for Trump to declare voter fraud and demanding recounts. Ultimately after some recounts, Joe Biden was declared the winner.
Following the announcement of Joe Biden as the winner of the US presidential election, Pfizer revealed its vaccine results from Phase 3 testing which showed a 90% effectiveness. Not long after, Moderna announced its vaccine results from Phase 3 testing which showed a 94.5% effectiveness. Both announcements are extremely positive results in steps towards normalisation. Markets reacted positively to the news but interestingly during the early days of the announcement markets saw a rotation out of growth stocks towards value stocks. Value continued to outperform growth up until the end of the month.
One major downside over the month was the continued rise of COVID-19 infections, particularly in Europe and the US. With the northern hemisphere heading into winter and the easing of restrictions in August and September, Europe and the US entered a second wave. Most European countries implemented new lockdown measure and some states in the US have started to tighten restrictions. Deaths have remained well below their prior peaks as treatment methods are better. However, the new infection rates are starting to put pressure on the medical system as hospitalisation rates increase. The rise in infections will continue to put pressure on any economic recovery for these economies until a vaccine can be rolled out.