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Investment planning; The third quarter drift.
Technical article
Publication date:
20 October 2020
Last updated:
25 February 2025
Author(s):
Technical Connection
Update from 1 October 2020 to 14 October 2020
The third quarter drift
(AF4, FA7, LP2, RO2)
The third quarter of 2020 has finished. After the strong bounce in Q2, things have quietened down somewhat.
The second quarter of 2020 witnessed a strong bounce-back across major markets, even dragging the UK up almost 10%. The third quarter has seen the markets somewhat run out of steam as evidence of a resurgence of COVID-19 has emerged, alongside the known, but approaching fast, risks of the USA Presidential election and Brexit.
|
|
30/06/2020 |
30/09/2020 |
Change in Q3 |
|
FTSE 100 |
6169.74 |
5869.91 |
-4.86% |
|
FTSE 250 |
17119.16 |
17315.3 |
1.15% |
|
FTSE 350 Higher Yield |
2725.93 |
2453.4 |
-10.00% |
|
FTSE 350 Lower Yield |
3962.87 |
4061.14 |
2.48% |
|
FTSE All-Share |
3410.93 |
3282.25 |
-3.77% |
|
S&P 500 |
3100.29 |
3363 |
8.47% |
|
Euro Stoxx 50 (€) |
3232.85 |
3193.61 |
-1.21% |
|
Nikkei 225 |
22288.14 |
23185.12 |
4.02% |
|
Shanghai Composite |
2984.67 |
3218.05 |
7.82% |
|
MSCI Em Markets (£) |
1506.832 |
1565.925 |
3.92% |
|
UK Bank base rate |
0.10% |
0.10% |
|
|
US Fed funds rate |
0.0%-0.25% |
0.0%-0.25% |
|
|
ECB base rate |
0.00% |
0.00% |
|
|
2 yr UK Gilt yield |
-0.09% |
-0.04% |
|
|
10 yr UK Gilt yield |
0.17% |
0.22% |
|
|
2 yr US T-bond yield |
0.16% |
0.13% |
|
|
10 yr US T-bond yield |
0.66% |
0.70% |
|
|
2 yr German Bund Yield |
-0.71% |
-0.70% |
|
|
10 yr German Bund Yield |
-0.54% |
-0.51% |
|
|
£/$ |
1.2356 |
1.2928 |
4.63% |
|
£/€ |
1.1001 |
1.1025 |
0.22% |
|
£/¥ |
133.3033 |
136.43 |
2.35% |
There are a few points to pick out from the mixed picture of Q3:
- With the obvious exception of the USA, markets are still down from the start of the year and below their post-23 March bounce back highs.
- Once again, the UK market had a weaker quarter than most other markets. In global terms, the UK looks cheap. The particularly poor performance of the FTSE 350 Higher Yield is a reminder of how hard the (former) big dividend payers (banks, oils, etc.) have been hit.
- In the UK, the more domestically oriented FTSE 250 rose faster than its FTSE 100 counterpart. Nevertheless, the FTSE 250 is still down 20.9% from the start of the year. The Footsie has declined by 22.2%.
- The best market performance for the year to date remains China, which did not drop as sharply as other markets in Q1 and has rallied more than most in Q3. Its performance has helped to buoy the MSCI Emerging Markets Index.
- Bond yields have generally been flat and near to zero.
- After the second quarter’s rally, the price of Brent crude was almost flat over the quarter. Gold added 6.34% in dollar terms, but the dollar was weak.
The rally in global markets that marked Q2 waned in Q3. The coming three months look to be that well known Chinese curse of ‘interesting times’ given the USA Presidential election, the uncertain path of the pandemic and the last chapter of the first book of Brexit.
Sources: FT, FTSE, MSCI, LSE, Stoxx, Investing.Com, Bank Of England, Federal Reserve, European Central Bank
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.
