uk markets –what’s going on and why is the usa doing

UK markets – what’s going on and why is the USA doing better than us? Friday 16 October 2020

2Brewin Dolphin | 2020 YTD Update

COVID-19 Markets The US The UK Income Sterling US Election Outlook

Blair MullenDivisional Director

Tel: 0292 034 7614Email: [email protected]

5 Callaghan Square, Cardiff CF10 5BT

Review of Year to date

Impact of COVID-19

Key Market Drivers

Impact on Income

Outlook

This publication is for FCA authorised individuals only and should not be distributed in whole or in part to retail clients.

3

COVID-19: the human story so far

Brewin Dolphin | 2020 YTD Update


Source: S&P 500 Total Return YTD 2020 - Thomson Reuters Eikon (Refinitiv), Data Retrieved 22 September 2020. Data used: S&P 500 (S&P 500 Index – CBOE, .SPX)Source: COVID-19 Global Cases YTD 2020 - Thomson Reuters Eikon (Refinitiv), Data Retrieved 22 September 2020. Data used: Global COVID-19 Cases (World, Coronavirus (COVID-19), Total Cases, Volume - XWCCOV=ECI)

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Tuesday, 31December 2019

Friday, 31 January2020

Saturday, 29February 2020

Tuesday, 31 March2020

Thursday, 30 April2020

Sunday, 31 May2020

Tuesday, 30 June2020

Friday, 31 July2020

Monday, 31 August2020

Confirmed COVID-19 Cases vs S&P 500 Total Return YTDAs of 21 September 2020

Global COVID-19 Cases S&P 500

First UK Case

January 31st

WHO Declare Global Pandemic UK lockdown

US $2 Trillion economic stimulus

Easing of UK lockdown begins

UK £330bn economic stimulus

March 11thMarch 16th

May 10th

March 25th

March 17th

4

What has happened to Markets?



Data as of 21 September 2020

Source: Thomson Reuters Eikon (Refinitiv), Data Retrieved 22 September 2020.Data used: UK Gilts (FTSE Actuaries UK Conventional Gilts All Stocks Index, .FTFS), FTSE All Share (FTSE All Share Index, .FTAS), S&P 500 (S&P 500 Index –CBOE, .SPX), China (MSCI China Price Index USD End of Day, .dMICN00000PUS), Property (MSCI United Kingdom IMI (STD) Liquid Real Estate Price Index GBP End of Day - .DMIUK0LRE2PGB), Gold (Gold Spot Multi-Contributor, XAU), Oil (ICE Europe Brent Crude Electronic Energy Future, LCOc1).

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Past performance is not a guide to future performance.

4.2%

19.2%

31.5%

20.9% 19.6%22.7%

18.3%

6.5%

-21.0%

3.0%

14.3%

-16.3%

-37.2%

26.1%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

UK Gilts FTSE All Share S&P 500 China Property Oil Gold

2019 2020 YTD

5

Putting markets in context: the US



-34%

-59%-49%

-34%

-86%

20202007200019871929

Peak-to-Trough Market DeclinesDeclines of the S&P 500 (Total Return, %)

1

17

31

4

34

20202007200019871929

Length of Market DeclinesDeclines of the S&P 500 (Months)

Source: ISI, Bloomberg, National Bureau of Economic Research, Haver Analytics, FMRCo (Asset Allocation Research Team) as of February 26, 2020. Data based on S&P 500 Index price returns. Duration ends with a complete retracement of losses. Recessions are defined by the National Bureau of Economic Research. Past performance is no guarantee of future results. You cannot invest directly in an index. The S&P 500®, a market capitalization-weighted index of common stocks, is a registered service mark of the McGraw-Hill Companies, Inc. and has been licensed for use by Fidelity Distributors Corporation.Retrieved at https://www.fidelity.com/viewpoints/market-and-economic-insights/bear-markets-the-business-cycle-explainedAdditional Source: Thomson Reuters Eikon, S&P 500 Index - CBOE, .SPX, Data Retrieved 17-07-2020


6

An Evolving Landscape



Source: Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020.Data used: FTSE All Share (FTSE All Share Index, .FTAS), S&P 500 (S&P 500 Index – CBOE, .SPX), NASDAQ (NASDAQ Composite Index, .IXIC), Dow Jones Industrial Average (Dow Jones Industrial Average Index, .DJI).


3.0%

21.0%

-3.2%

-21.0%-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

S&P 500 NASDAQ Dow Jones Industrial Average FTSE All Share

US and UK Indices Performance YTD

7




Source: Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020. Sector data also provided by Thomson Reuters Eikon (Refinitiv), Data Retrieved 22-09-2020, S&P 500 Index - CBOE, .SPX.


-22.1%

17.2%

3.1%

-46.9%

-0.1%

-6.7%

1.3%

-10.7%

5.1%

22.8%

-10.9%

Financia l

Consurmer Discretionary

Materials

Energy

Consumer Staples

Industrials

Health Care

Util ities

Communication Services

Information Technology

Real Estate

S&P 500 Sector Performance YTD

Financials, 9.8%

Consumer Cyclicals,

16.0%

Consumer Non-Cyclicals, 8.9%

Industrials, 8.4%Healthcare,

12.8%

Technology, 34.4%

S&P 500 Sector Breakdown

Financia ls Consumer Cyclica lsBasic Materials EnergyConsumer Non-Cyclica ls IndustrialsHealthcare Util itiesReal Estate Technology

8




Source: Thomson Reuters Eikon (Refinitiv), Total Return YTD as of 21-09-2020, Data Retrieved 22-09-2020. Sector data also provided by Thomson Reuters Eikon (Refinitiv), Data Retrieved 22-09-2020.Data used: US Banks (Dow Jones US Banks Index, .DJUSBK), US Financials (Dow Jones U.S. Financials Index, .DJUSFN), Facebook (Facebook Inc, FB.O), Amazon (Amazon.com Inc, AMZN.O), Apple (Apple Inc, AAPL.O), Tesla (Tesla Inc, TSLA.O), Microsoft (Microsoft Corp, MSFT.O), Alphabet (Alphabet Inc, GOOG.O), Netflix (Netflix Inc, NFLX.O).


-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

12/31/2019 1/31/2020 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/31/2020

FAATMAN vs Banks & Financials YTD

Banks Financials Facebook Am azon Apple Microsoft Alphabet Net flix

-100%

0%

100%

200%

300%

400%

500%

12/31/2019 1/31/2020 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/31/2020

FAATMAN vs Banks & Financials YTD

Banks Financials Facebook Am azon Apple Tesla Microsoft Alphabet Net flix

9

The UK: a contrasting story



Source: Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020.Data used: FTSE 100 (FTSE 100 Index, .FTSE), FTSE 250 (FTSE 250 Index, .FTMC), UK Small Cap (iShares MSCI UK Small Cap UCITS ETF GBP (Acc), .CUKS.L), FTSE All Share (FTSE All Share Index, .FTAS), S&P 500 (S&P 500 Index – CBOE, .SPX), Gold (Gold Spot Multi-Contributor, XAU), Oil (ICE Europe Brent Crude Electronic Energy Future, LCOc1).


-21.1% -22.9% -23.6% -21.0%

-37.2%

26.1%

3.0%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

FTSE 100 FTSE 250 UK Small Cap FTSE All Share Oil Price Gold S&P 500

UK Indices Performance YTDTotal Return

10




Source: Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020. Sector data also provided by Thomson Reuters Eikon (Refinitiv), Data Retrieved 22-09-2020, FTSE All Share (FTSE All Share Index, .FTAS).


-53.9%

-3.5%

-13.6%

-14.4%

-2.4%

-24.4%

-33.8%

-14.9%

-29.7%

-7.0%

Oil and Gas

Basic Materi als

Indust rials

Consum er Goods

Health Care

Consum er Services

Telecommunicat ions

Utilit ies

Financials

Technology

FTSE All Share Sector Performance YTD

Financials, 18.6%

Consumer Goods, 17.2%

Basic Materials,

10.3%Oil and Gas, 8.9%

Consumer Services,

12.9%

Industrials, 11.8%

Health Care, 12.9%

FTSE All Share Sector Breakdown

Financials Consumer Goods Basic MaterialsOil and Gas Consumer Services IndustrialsHealth Care Utilities TelecommunicationsTechnology

11




Source: Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020. Sector data also provided by Thomson Reuters Eikon (Refinitiv), Data Retrieved 22-09-2020.Data used: FTSE All Share (FTSE All Share Index, .FTAS), Royal Dutch Shell (Royal Dutch Shell PLC, RDSb.L), EasyJet (Easyjet PLC, EZJ.L), Ocado (Ocado Group PLC, OCDO.L), AstraZeneca (AstraZeneca PLC, AZN.L), Lloyds Banking Group (Lloyds Banking Group, LLOY.L).

EasyJet Lloyds Banking Group Royal Dutch Shell FTSE All Share AstraZeneca Ocado-63.9% -61.6% -55.1% -21.0% 16.5% 119.2%


-100.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

12/31/2019 1/31/2020 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/31/2020

Key Movers within the UKYear to Date, as of 21st September 2020

FTSE All Share Royal Dutch Shell EasyJet Ocado AstraZeneca Lloyds Banking Group

12

Impact upon Income



UK's Top 10 Dividend PayersBased on the Past 5 Years

Royal Dutch Shell CutBP CutVodafone CutRio Tinto CutBHP CutLloyds Banking Group SuspendedHSBC SuspendedGlaxoSmithKline FlatAstraZeneca GrewBritish American Tobacco Grew

Source: Baillie Gifford & Co. and Eikon content from Refinitiv. Reflects dividend decisions as at 21 September 2020.Source: Dividend history retrieved from Thomson Reuters Eikon (Refinitiv) and accurately reflects as of 21-09-2020, Data Retrieved 22-09-2020. Data used: Royal Dutch Shell (Royal Dutch Shell PLC, RDSb.L).


£0.00

£0.05

£0.10

£0.15

£0.20

£0.25

£0.30

£0.35

£0.40

£0.45

Mon

day,

1 N

ovem

ber 1

982

Tues

day,

1 M

ay 1

984

Frida

y, 1

Nove

mbe

r 198

5Fr

iday,

1 M

ay 1

987

Tues

day,

1 N

ovem

ber 1

988

Tues

day,

1 M

ay 1

990

Frida

y, 1

Nove

mbe

r 199

1Sa

turd

ay, 1

May

199

3Tu

esda

y, 1

Nov

embe

r 199

4W

edne

sday

, 1 M

ay 1

996

Satu

rday

, 1 N

ovem

ber 1

997

Satu

rday

, 1 M

ay 1

999

Wed

nesd

ay, 1

Nov

embe

r 200

0W

edne

sday

, 1 M

ay 2

002

Satu

rday

, 1 N

ovem

ber 2

003

Sund

ay, 1

May

200

5W

edne

sday

, 1 N

ovem

ber 2

006

Thur

sday

, 1 M

ay 2

008

Sund

ay, 1

Nov

embe

r 200

9Su

nday

, 1 M

ay 2

011

Thur

sday

, 1 N

ovem

ber 2

012

Thur

sday

, 1 M

ay 2

014

Sund

ay, 1

Nov

embe

r 201

5M

onda

y, 1

May

201

7Th

ursd

ay, 1

Nov

embe

r 201

8Fr

iday,

1 M

ay 2

020

Royal Dutch Shell Dividend HistoryNet Payment Data November 1982 - September 2020

13

Impact upon fixed income investments



Government Balance Sheets have Expanded Rates of Return from safe assets at all time lows

Source: The Federal Reserve Recent Balance Sheet Trends, The Federal Reserve, Data correct as at 21-09-2020, Data Retrieved 22-09-2020, accessed from https://www.federalreserve.gov/monetarypolicy/bst_recenttrends_accessible.htmSource: 10 Year Government Bonds, Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020.Data used: UK (United Kingdom 10 Year Benchmark, GB10YT=RR), US (United States 10 Year Benchmark, US10YT=RR), Europe (Euro 10 Year Benchmark, EU10YT=RR).


£0M

£1,000,000M

£2,000,000M

£3,000,000M

£4,000,000M

£5,000,000M

£6,000,000M

£7,000,000M

£8,000,000M

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Federal ReserveRecent Balance Sheet Trends

-1.5-1.0-0.50.00.51.01.52.02.53.03.5

9/7/2015 9/7/2016 9/7/2017 9/7/2018 9/7/2019 9/7/2020

10 Year Government BondsBond Yields

UK US Europe

14

How does Sterling fit into all of this?



Source: Thomson Reuters Eikon (Refinitiv), Price Return YTD as of 21-09-2020, Data Retrieved 22-09-2020.Data used: US Dollar (UK Pound Sterling/US Dollar FX Spot Rate, GBP=), Euro (UK Pound Sterling/Euro FX Spot Rate, GBPEUR=), Japanese Yen (UK Pound Sterling/Japanese Yen FX Spot Rate, GBPJPY=).


-3.4%

-7.9%

-5.4%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

Wednesday, 4March 2020

Saturday, 4 April2020

Monday, 4 May2020

Thursday, 4 June2020

Saturday, 4 July2020

Tuesday, 4August 2020

Friday, 4September 2020

Sterling YTD Performance Relative to Major Global Currencies

US Dollar Euro Japanese Yen

15

The US Election



Presidents Tend to Lose When There’s an Election-Year Recession

Since 1900, only two presidents have won

their second electionwith a recession

occurring sometime in the last two years of their

first term:

William McKinley (1901)Woodrow Wilson (1916)

Source: Accessed 17-07-2020 via https://www.foxbusiness.com/economy/wilbur-ross-left-wing-media-trying-to-trigger-a-recession


16

Outlook



Brexit

Pandemic Control

Speed of Recovery

Unemployment Government Stimulus

TaxTrade Reform

The opinions expressed in this publication are not necessarily the views held throughout Brewin Dolphin Ltd.

17

Disclaimers



This publication is for FCA authorised individuals only and should not be distributed in whole or in part to retail clients.

The value of investments can fall and you may get back less than you invested. or if income is mentioned The value of investments and any income from them can fall and you may get back less than you invested.

Past performance is not a guide to future performance.

We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk


If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset.

The opinions expressed in this publication are not necessarily the views held throughout Brewin Dolphin Ltd.

18

2nd Floor, 5 Callaghan Square, Cardiff CF10 5BTTel: 029 2034 0100

https://www.brewin.co.uk/cardiff

Brewin Dolphin Limited is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number: 124444). Registered office: 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales – company number: 2135876. VAT number: GB 690 8994 69

uk markets –what’s going on and why is the usa doing

Documents