Weekly multi-asset desk views

Weekly Review: 13 November 2020

Weekly Mag updates

Summary

  • Positive vaccine news from Pfizer and BioNTech, as European countries continue to break COVID-19 records
  • Joe Biden is declared the winner of the 2020 election, however President Trump shows no signs of accepting defeat
  • The US weekly jobless claims fell to its post-pandemic low, whilst UK GDP expanded 15.5% during Q3
  • Outlook: Brexit, the spread of COVID-19 and further vaccine news remain important topics in an otherwise quiet week
  • The portfolio returned +0.47% this week, taking the year-to-date returns to -3.29%.

Strategy review

The portfolio returned +0.47% this week, taking the year-to-date returns to -3.29%. Our equity exposures were the greatest contributor to returns this week. Within fixed income, small gains in our high yield and emerging market debt exposures were offset by our government bond holdings. Infrastructure investments posted small gains and total return strategies were a small negative in aggregate.

Figure 1: Performance against benchmark

Figure 1: Performance against benchmark

Source: Insight. Gross returns. 1Data as at 13 November 2020. Insight Broad Opportunities Fund (share class S GBP, inception 29 February 2012. 2 Data as at 31 October 2020. Insight broad opportunities strategy (inception 31 Dec 2004). The long-term track record of the Insight broad opportunities strategy has a base currency of USD. This performance has been adjusted by interest rate differentials to derive a GBP proxy. No currency adjustments have been made to the underlying investments. Please see full performance information within the disclosures at the end.

Market and economic review

The week began with positive news on a vaccine for COVID-19, which resulted in strong performance for risk markets. Pfizer and BioNTech announced that their vaccine, in phase three, was 90% effective in immunisation against the virus. Whilst the news is positive, as the vaccine clearly boosts your immunity to the virus, it does come with some logistical challenges. Firstly, it requires two shots, and secondly, it needs to be stored in extremely cold, freezing conditions. That said, it is clearly a step in the right direction and potentially forthcoming announcements from other candidates such as Moderna and AstraZeneca will be watched very closely.

The news comes at a very good time, with a number of records being broken this week. Starting with the UK, where England is in lockdown, and after two to three weeks of stability in case numbers, new cases on Thursday 12 November reached 33,517 (according to figures from Bloomberg). There were similar negative reports elsewhere, with France seeing hospitalisations at the highest they have been since April, Italy reporting record daily numbers, and US fatalities rising to their highest level since May.

Moving on, and over the weekend there was broad acceptance that Joe Biden had won the US presidential election, even though President Trump is still yet to concede. It appears that Congress will be divided, with the Republicans potentially maintaining control of the Senate and the Democrats likely to have a majority in the House of Representatives. This news also helped equities rally, with the market seemingly paying little attention to the various legal challenges threatened by the President Trump. That said, sentiment was dampened as the week continued, with reports claiming that Trump administration would take a step back from stimulus negotiations. This is seen as a negative development given that Senate Majority Leader McConnell was looking to pass a materially smaller fiscal package than the White House seemed willing to support.

Turning to data releases, and the weekly initial jobless claims from the US fell to its lowest number since the initial COVID-19 spike. For the week ending 7 November, there were 709,000 claims (22,000 lower than the market expected). The continuing claims also reached a post-pandemic low, at 6.79m. The rest of the data docket can be deemed as second tier, however we did see the UK GDP reading for Q3, which came it at a 15.5% expansion, slightly behind market expectations. This of course follows a sharp 19.8% contraction in the second quarter, and with ongoing virus restrictions in the UK, a further contraction is expected for the fourth quarter.

Finishing on central banks, and on Thursday evening we were treated to a panel hosted by the European Central Bank (ECB), with US Fed Chair Powell, ECB President Lagarde and Bank of England Governor Bailey. Despite the positive vaccine news, they each insisted that economic challenges in relation to the pandemic lay ahead.

Staying with the ECB, and in a speech earlier in the week, Lagarde stated that the bank’s forthcoming stimulus package would most likely feature emergency bond purchases and cheap loans to banks, as it assesses its options faced with a second wave of the pandemic. Expectations are growing that the ECB will expand both its pandemic emergency purchase programme and targeted longer-term refinancing operations while keeping its deposit rate unchanged. Government bond yields fell in the eurozone following the statement, having risen early in the week on the US election result and the Pfizer vaccine announcement.

Outlook

In what is likely to be a quieter week relative to those just passed, Brexit negotiations will come into focus as the UK and the EU continue discussions on their future relationship. At the end of this year the transition period concludes, and the UK will no longer be a part of the EU’s single market and customs union. Time is clearly running out for an agreement to be reached. EU leaders are due to meet on Thursday, which would provide a good opportunity to discuss a potential deal. However, given the number of informal deadlines that have already been breached, it is unclear whether a deal will be tabled by then.

The spread of COVID-19 will remain a focal point for markets, along with any developments on lockdowns and what they may mean for economic activity. On this point, French Prime Minister Jean Castex acknowledged that the country may tighten lockdown restrictions further in light of rising case numbers and hospitalisations. Following the news from Pfizer and BioNTech, focus will be on news releases from alternative potential vaccines, from the likes of Moderna, AstraZeneca and a whole host of others.

Finally on the data front, US industrial production, retail sales, housing starts and building permits are due, along with the weekly jobless claims on Thursday, perhaps of particular importance given the most recent positive releases.

 

Important information

5-year performance record to 31 December 2020

  Calendar year returns   12-month rolling returns  
  2020 2019 2018 2017 2016   2019-2020  2018-2019  2017-2018 2016-2017 2015-2016 Currency
Insight's broad opportunities strategy (pooled) (GBP) 0.18 13.13 -4.99 10.13 5.05   0.18 13.13 -4.99 10.13 5.05 GBP
3-month GBP LIBID 0.17 0.68 0.60 0.23 0.38   0.17 0.68 0.60 0.23 0.38  


Please refer to the following risk disclosures. 
Returns are shown gross of fees. Returns are shown for the Insight Broad Opportunities Fund (share class S GBP, inception 29 February 2012) and the Insight Broad Opportunities Strategy (inception 31 Dec 2004).

RISK DISCLOSURES

Past performance is not indicative of future results. Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations.

The performance results shown, whether net or gross of investment management fees, reflect the reinvestment of dividends and/or income and other earnings. Any gross of fees performance does not include fees and charges and these can have a material detrimental effect on the performance of an investment.

Any target performance aims are not a guarantee, may not be achieved and a capital loss may occur. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected. Portfolio holdings are subject to change, for information only and are not investment recommendations.

ASSOCIATED INVESTMENT RISKS

Multi-asset

  • Derivatives may be used to generate returns as well as to reduce costs and/or the overall risk of the portfolio. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Investments in bonds are affected by interest rates and inflation trends which may affect the value of the portfolio.
  • The investment manager may invest in instruments which can be difficult to sell when markets are stressed.
  • Property assets are inherently less liquid and more difficult to sell than other assets. The valuation of physical property is a matter of the valuer's judgement rather than fact.
  • While efforts will be made to eliminate potential inequalities between shareholders in a pooled fund through the performance fee calculation methodology, there may be occasions where a shareholder may pay a performance fee for which they have not received a commensurate benefit.

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