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It is a really good time for investors that are positive on stocks. First of all, the US presidential election is finally out of the way. Now, in the days after the vote, markets had already pushed higher. Deutsche Bank reckons it was the biggest two-day rally in US stocks after any election since 1900.
After Joe Biden clinched the presidency, markets pushed higher still, but now we have a cuffle. We have what looks like a meaningful breakthrough on a coronavirus vaccine from Pfizer and BioNTech. This is exactly the combination that optimists have been hoping for.
So firstly, going back to politics. The key here is that Democrats have not, for now at least, taken the Senate. That means we're likely to have a Democrat in the White House but a split Congress. And all things being equal, that will constrain the ambitions that Joe Biden's administration might have to raise taxes and regulation. And broadly speaking, that's good for corporate America and it's good for stocks.
Again on politics, some markets are really worth watching. The Chinese renminbi had a very volatile week in election week, but it ended up being the best week for the currency in a year. Markets are betting that Joe Biden is going to have a much more constructive relationship with China over trade than Donald Trump.
But the news that an important vaccine trial has proven to be more than 90 per cent effective is a real shot in the arm in every sense of the word. Already some investors were starting to say after the US election that actually the whole thing was a bit of a sideshow, that the real driver for markets this year is the coronavirus pandemic. If you fix that, you fix all kinds of parts of the market that are particularly sensitive to the impact of the virus.
If you look at airlines, hotels, anything that's particularly economically sensitive like banks, this is what investors in those stocks have been hoping for all this time. It's early days, but it's starting to look like the final weeks of 2020 could be somewhat more positive, at least for fund managers, than the start.