about 3 years ago • 3 mins
Major stock indexes might’ve flown over record highs in November, but investment bank BNY Mellon says stock markets could be feeling a little worse for wear by the end of the year 😓
Double-digit returns within the space of a month are rare for stock markets, but that’s exactly what the Stoxx 600 Europe index – which comprises 90% of the value of European stock markets – did in November, banking a record-breaking 14% rise. It even outperformed the major US indexes – and this in a month where the S&P 500 reached new highs and the Dow Jones Industrial Average posted its biggest monthly jump since 1987.
Cue Christmas grinch BNY Mellon, which thinks stocks could drop up to 7% before the year ends 🎄 It’s not alone either: other analysts have pointed to the size and speed of the recent rally, and are arguing stock markets probably don’t have much further to go this year.
For markets: Blessings in disguise.
BNY Mellon thinks the drop could actually work in investors’ favor and represent a good time to buy into some new stocks 📊 The investment bank’s still optimistic for the future, after all: it reckons that once Europe and the US have limped through next quarter’s lingering coronavirus effects, a stock market recovery should kick off in the second quarter of 2021.
The bigger picture: It’s cyclicals’ time to shine.
This year’s US stock market rallies have generally been caused by a handful of Big Tech names, but this latest move higher has instead been driven by “cyclicals”: stocks that are sensitive to the economy and tend to do well when a recovery’s on the cards 🃏 That explains why European stock markets – which aren’t particularly tech-heavy – outperformed their American rivals, and why the rally’s benefiting a bigger selection of companies: 467 stocks in the main US stock market rose in November – the most since April.
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According to a new report from investment bank Goldman Sachs, one ought to invest in the UK even though one knows Brexit is coming 🇬🇧
Goldman Sachs reckons UK investments have a couple of big things going for them. For one, the firm is expecting the UK and European Union (EU) to finally reach a trade agreement in mid-December, which should give investors a bit more certainty about the country’s relationship with European companies 🤝 And for another, it’s assuming vaccinations will be well underway by next quarter, and it’s therefore forecasting better economic growth for the UK than most other analysts are.
For markets: Cheap and cheerful.
Goldman Sachs is particularly keen on the British pound, as well as the stocks of companies that stand to benefit from it: think any that sell to the UK itself, like homebuilders and national banks 💷 But frankly the country’s entire stock market looks cheap compared to others across the globe, says the firm. That’s partly because it’s heavily skewed toward companies in the energy and financial sectors – both of which have underperformed this year – and partly because investors have been shunning British assets until the one-two punch of Brexit and coronavirus starts to heal.
The bigger picture: Beat you to it.
Looks like Goldman was right to assume vaccinations waould be on their way soon: the UK became the first country to authorize the Pfizer-BioNTech vaccine for emergency use on Wednesday, with the rollout due to kick off next week 💉 The US might not be far behind, while the EU’s regulator – which threw some shade at the UK by saying that a longer procedure was more appropriate – is shooting for the end of this month.
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