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Vaccine optimism and market frenzies

By Mike Narouei, Content Producer at Boring Money

2 Dec, 2020

It’s fair to say that November was a month of highs and lows – both in the financial markets and, no doubt, lockdown-weary households around the country. But having started with the bleakness of yet more social restrictions and election madness in the US, by November 9, news of Pfizer’s Covid-19 vaccine breakthrough provided the proverbial shot of optimism the world had been waiting for.

This article reproduces information from a press release issued by Interactive Investor on 2 December 2020

It’s fair to say that November was a month of highs and lows – both in the financial markets and, no doubt, lockdown-weary households around the country.

But having started with the bleakness of yet more social restrictions and election madness in the US, by November 9, news of Pfizer’s Covid-19 vaccine breakthrough provided the proverbial shot of optimism the world had been waiting for.

While people around the country started to see some light at the end of the tunnel, the markets were already throwing a party in 24-hour sunshine. Global shares boomed and some of the world’s largest investment platforms crashed as people rushed to cash in on the market rally. interactive investor noted that November 9 was its busiest day ever for customer trades, up 23.5% on its previous record high in June 2020.

The FTSE100, which chalked up its best performance since 1989, was driven in particular by the recovery of stocks that will benefit from a “return to normal” once the vaccine kicks in. Alongside pharma groups, there were sharp rises in airline-related companies (such as Rolls Royce, BA-owner IAG and even BP and Shell), while banks also saw a bump.

But did all the spikes in individual company shares reflect a more general shift in investor behaviours? Not really, it seems. According to interactive investor, the top 10 most bought funds and investment trusts remained largely unchanged from October.

In these categories, it seems our eye continues to be caught by the East. China-themed investment trusts were the second, third and fourth most popular products bought by ii investors. Eastern-themed funds also made a showing in ii’s top 10 list, though global funds took six of the 10 bestseller spots.

And what does this mean for little old UK? Well, we’re not giving ourselves much investment love at the moment. Not only is the FTSE still down on the year, but only the City of London investment trust made made ii’s top 10 list in November.

In a final comment on the state of the market, interactive investor noted that its customers are continuing to plump for active investments over passive options. Back in March, Vanguard had six funds in its top 10 list – while now, only its stalwart Lifestrategy 80% Equity and 60% Equity funds feature in a list otherwise full of active investments (six of which come from Baillie Gifford).

Obviously it’s worth contextualising this – interactive investor customers traditionally hold much larger balances and therefore might be more prone to active investment (meaning actual people pick which stocks they think will go up or down, vs passive funds, which simply replicate the performance of a specified ‘index’ or basket of shares). Active managers have long-argued that they will perform better in a downturn – though evidence published in an FT article last month suggested many active funds are still struggling vs their index.

The conclusion? 2020 has been as mad as a box of frogs. Will the vaccine roll-out get us “back to normal” and lead to a prolonged bull market? Will we be plunged back into a third wave and see more market drops? Who knows. But for now, here’s what the clever folk at interactive investor are saying:

- “The likes of Fundsmith Equity, Scottish Mortgage and Vanguard LifeStrategy funds remain clear favourites among our customer base regardless of the market condition, having won them over with stellar performance track records and solid investment philosophies. However, the persistence of the eastern theme suggests that some customers have turned to professional stock pickers to profit from the prevailing market conditions which has seen China, Japan and other Asian continues fare much better than Western regions in terms of managing Coronavirus.”

- Teodor Dilov, Fund Analyst, interactive investor

Top 10 most-bought funds, investment trusts and equities on interactive investor in November 2020

Funds

  1. FUNDSMITH EQUITY

  2. BAILLIE GIFFORD AMERICAN

  3. BAILLIE GIFFORD CHINA

  4. BAILLIE GIFFORD POSITIVE CHANGE

  5. VANGUARD LIFESTRATEGY 80% EQUITY

  6. BAILLIE GIFFORD GLOBAL DISCOVERY

  7. BAILLIE GIFFORD PACIFIC

  8. VANGUARD LIFESTRATEGY 60% EQUITY

  9. BAILLIE GIFFORD LONG TERM GLOBAL GROWTH

  10. LEGG MASON IF JAPAN EQUITY

Investment Trusts

  1. SCOTTISH MORTGAGE

  2. BAILLIE GIFFORD CHINA GROWTH TRUST

  3. FIDELITY CHINA SPECIAL SITUATIONS

  4. JPMORGAN CHINA GROWTH & INCOME

  5. PACIFIC HORIZON IT

  6. BAILLIE GIFFORD SHIN NIPPON

  7. ALLIANZ TECHNOLOGY

  8. EDINBURGH WORLDWIDE

  9. CITY OF LONDON

  10. MONKS

Equities

  1. ROLLS ROYCE HLDGS

  2. INTL CONS AIRLINE

  3. LLOYDS BANKING GP

  4. REMOTE MONITORED S

  5. BP

  6. CINEWORLD GROUP

  7. NOVACYT

  8. OMEGA DIAGNOSTICS

  9. GLAXOSMITHKLINE

  10. NIO INC