CIO Monthly View with Will Bartleet, CIO and multi-asset portfolio manager at Pacific Asset Management
Equity markets rounded off an extraordinary year with gains in most markets. The global roll out of the vaccine for COVID-19 began in the UK, which was the first country to approve the Pfizer/BioNTech vaccine. The UK’s Medicines and Healthcare products Regulatory Agency also approved the AstraZeneca/Oxford University vaccine which has the advantage of being able to be stored in a conventional refrigerator, easing the distribution challenges of the Pfizer and Moderna vaccines.
This positive development was tempered by the news that a new strain of COVID-19 is spreading at an alarming rate in the south east of England. In the final days of the year, the UK and Europe agreed a trade deal, ending months of uncertainty. Sterling rallied on the news, with the Pound ending the year at its highest level against the dollar for 2020.
All results showed efficacy in treating the virus; the Moderna and Pfizer results were particularly strong, showing upwards of 90% effectiveness in trials of over 30,000 participants each. Over the course of the month, economic indicators continued to point to positive growth, albeit at a slower rate, with some of this being attributed to second lockdowns. Unemployment in the UK crept up to 4.8%, from 4.5% previously.
UK equity markets rallied over the month, outperforming global equities as investors were relieved that the UK managed to negotiate a trade deal with Europe at the eleventh hour. However, it was emerging markets, boosted by their strengthening currencies that led the way. This was demonstrated within our portfolio by the Pacific North of South fund which generated the strongest performance of our equity holdings over the month.
Overall, the top performing asset class in December was gold, which rebounded sharply after drifting over the past few months. The gold price has fallen despite real (inflation adjusted) yields falling back to their lows; we think this provides an opportunity and have purchased a holding in gold mining shares. Whilst these are equities, their returns are strongly linked to the gold price where we expect higher prices. Gold mining companies have also slipped versus the gold price since the summer and so we believe there is a good opportunity for catch up.
IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority. The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation in respect of such securities or other financial instruments. Where past performance is shown it refers to the past and should not be seen as an indication of future performance.