More virus concerns have been evidenced this week as Joe Biden warned that more than 100,000 American lives could be lost in the next month (more than total UK deaths to date), Hong Kong entered lockdown for the first time and Boris Johnson suggested that the third lockdown could last until summer. Whilst much of the commentary seems to be focused on how the world will emerge from lockdowns, for now, the near-term issue of combating rising cases and deaths remains firmly in scope for investment outcomes.
The US Dollar exhibited further weakness this week as markets appear to be pricing in Biden’s stimulus bill. As with those passed by his predecessor, this one would be financed by the Federal Reserve’s printing press – and as the perennial economic rules of supply and demand dictate, an influx of Dollars will drive down the value of the greenback. Given these dynamics, some caution and consideration is required when investing in companies that earn revenue in Dollars.
A few companies have updated markets on Q4 earnings this week with many more set to do so over the coming weeks. As results season gets underway, it will be interesting to see how markets respond given the elevated valuations already abundant across assets. Will beating consensus estimates continue to drive prices higher? Will even small misses alert investors to inflated valuations? As this news permeates markets, the Manager will keep a close eye on results with a focus on long-term fundamentals, not allowing itself to be swayed by short-term swings in sentiment.
Quote of the week
“We will be back.” Donald Trump, former US President.
No, not the words of a terminator with multiple personality disorder, the words of Donald Trump. In the end, he went quietly, if gracelessly, boarding “the chopper” bound for Florida. Investors certainly have a lot to thank him for; as do graduates pulling together quotes of the week over the last few months, but only time will tell how far-reaching his legacy really is. In the meantime, Donald, “Hasta la vista, baby”.
Source: Sanlam Private Wealth