The past month was a record month for stock markets, with the main global indices posted increases not seen in several years with overall gains exceeding 10%. The main player was the old continent with the Euro Stoxx 50 index which recorded an increase of 18% where the peripheral indices of Spain, France and Italy stood out with returns of over 20% for the month. Also in US excellent gains were recorded with the S&P 500 index up 10.75% and Nasdaq up 11.8%, the best month since April 2020. Good also Dow Jones +11.8% best monthly increase since 1987. The Swiss SMI index remains a bit behind with +9.28% due to its more defensive propensity.

The markets positively welcomed the news regarding the FDA’s approval of several drug treatments and the development of effective vaccines against COVID-19. In some countries the first vaccinations are already scheduled for this December, thus fuelling hopes of a return to normal social and economic life during 2021. Markets have focused and are betting on a broad recovery for 2021 despite the current continued increase in the number of infections, with consequent business closures, and less than encouraging Q4 macroeconomic data. Another factor that has positively affected the markets is the declaration that Trump will not appeal to the Supreme Court, thus giving the green light for Biden to take office in the White House. The newly elected president is doing well in choosing his future collaborators. In particular, the appointment of Janet Yellen as the new finance minister has been much appreciated, as she is known for her expertise as well as for her expansive monetary policy.

In spite of all this euphoria, we still belive that we need to be very cautions in terms of investment. The economic consequences due to COVID-19 will be heavy and difficult to absorb. The real economy, mainly because of to the limitations imposed by the various governments, will find it difficult to recover. Stock market valuations are very high especially in some sectors. The vaccination campaign against the coronavirus is underway, but we will have to wait at least until the second quarter of 2021 before having a definitive and global response on efficacy. We maintain a neutral view on the markets in the short term.