OCM Commentaries

Market Commentary 4th November 2020

By November 4, 2020 No Comments

Markets Brace as US Election Results Roll In

After a noisy week in markets, all attention turns to the US, where the result of the Election remains unknown, with the two candidates locked in a tight race to the White House. With a significant proportion of the votes in key battleground states still yet to be counted, President Trump falsely declared his victory earlier this morning, before complaining about the ongoing vote counting and threatening to involve the Supreme court should his margin disappear. While it isn’t clear who will be the next President at this stage, it is clear that the incumbent president will not go down without a fight, with markets bracing for greater volatility in the coming days as the events unfold.

As we wait for the final results to come in throughout the day in the US, with some states expecting a delay of 48 to 72 hours in vote counting, global markets remain choppy, with opening losses in European markets coming off throughout the trading session. Should the result drag on and ultimately seek the involvement of the Supreme Court in calling the winner, markets are likely to experience further volatility as the uncertainty continues further into the month. As such, markets and investors remain on edge this morning, with heightened short-term volatility expectations.

For more information on the results so far, please see the attached Market Update document.

Market Outlook

As markets remain firmly focused on the election this morning, we look ahead to what the result might mean in the medium to long term. As it stands, it looks as though the Democrats have maintained a majority in the House of Representatives, therefore a Trump victory would likely involve a continuation of the status quo, with the President likely to continue recent talks to issue stimulus in the coming months and maintain his current foreign policy stance. For markets, this would involve a marginal upside, with no change to the medium and long term outlook. A Biden victory at this stage would likely result in near term uncertainty in the transition period before he is inaugurated, however expectations for greater stimulus in the first half of 2021. He is likely to take a softer stance on foreign policy, however longer term (post-pandemic) he is likely to implement tax increases. In this case, we expect to see near term volatility, positive uplifts in the medium term and no overall change to the long term outlook, based on the expectation that the recovery will be supported by greater stimulus prior to fiscal tightening much later in his presidency (which he would then need to pass through a divided Senate).

We wait to see the results coming in, although we are likely to see more volatility in the short term, neither outcome materially alters our medium or long term outlook, with the portfolios well positioned to navigate near term volatility while maintaining an underweight exposure to mega cap US tech which has struggled over the week.

Lockdown News Moves Markets

Following the volatility experienced in recent weeks on the back of increasing Covid-19 cases across Europe and the implementation of new lockdown measures, markets have pared back losses on expectations for further fiscal and monetary stimulus in the short term, with growing optimism over further central bank action next month. At the same time, investors have digested a wave of earnings beats in the Q3 earnings season alongside positive news flow on a potential Brexit deal. Markets have since rebounded somewhat; however political headlines are likely to dominate short term movements. Investors will be hoping for a relatively quick resolution to the US election drama and central bank action to continue positive momentum into 2021.


While the increase in intraday volatility has resulted in choppy market movements, as we highlighted in last week’s market commentary, there is no need to panic. None of the recent news flow changes our outlook or return expectations over the medium to long term, and all is as expected during this stage of the market cycle. As always, we are constantly monitoring markets and the news flow, and we remain content with the current allocation in the context of current market conditions and the wider outlook.

Key Events We Are Watching This Week:

  • Thursday: BoE rate decision, Fed rate decision
  • Friday: US Employment Data for October
  • Saturday: Chinese Balance of Trade for October

For anyone who wants further data to substantiate the position please review the attached Global Economic Update document.

Model Portfolios & Indices

Global stock markets continued to display high levels of volatility over the week as countries across the world battle with surging virus cases, the announcement of new lockdown restrictions and political uncertainty. The portfolios declined over the week on the market decline experienced last Wednesday, however performance remains relatively flat on a 1-month basis following outperformance in October. Looking ahead, we are optimistic on the medium-term outlook from here, accepting further volatility in the near term, but confident in our positioning, with well diversified portfolios which have been designed to weather these market conditions. Year to date, in comparison to the benchmarks, we have recovered from the March coronavirus decline, and we are in a strong position moving forward.



Important Information


Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value.  You may not get back all of your investment and the final value of your investment will depend on the performance of your portfolio.  The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations.  Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges and trading spreads.  Unless stated, income is reinvested into the portfolio.  The information contained in in this document is for information purposes only.  It does not constitute advice or a recommendation or an offer or solicitation for investment.


This Day in History


On this day in 2008, Democratic politician Barack Obama became the first African American to be elected the President of the United States.


Have a great week,


Jason & Gina