The markets were a true reflection of how tight the US presidential election was. As the uncertainty grew on the key day, investors were adapting to what seemed to be the most likely outcome at all times. Once the victory of Biden in the White House and the Republican in the Senate became the main stage, the stock markets consolidated the increases, the US debt moderated its rise in profitability and the euro gained integers against the dollar. Finally, what seemed like a week full of uncertainty has had a positive end according to the reading of the markets.
Thus, in the United States the three main stock indices, Dow Jones, S&P 500 and Nasdaq finished with a weekly advance of 6.87%, 7.32% and 7.16% respectively. In Europe, the increases had their replica and all the selective ones experienced forceful rebounds. Italian FTSE and Stoxx 50 had the best luck, rising 9.69% and 8.31% for the week. German Dax, French Cac and British FTSE added 7.99%, 7.98% and 5.97%,
respectively, while the Ibex was not far behind and confirmed an increase of 6.48% that took it to 6,870.4 points in what was its best week since the 10.94% it gained in the first of June. The tone was so positive that not even the moderation that the indices experienced on Friday with the Ibex dropping 0.78% was able to cloud it.
In the selective Spanish, practically all the listed companies were revalued. Amadeus (+ 15.61%), Solaria (+ 11.98%) and ACS (+ 9.95%) ended the week as the most bullish while on the opposite side, CIE Automotive (+ 0.36%), Viscofan (-0.09%) and Telefónica (-0.43%) were the weakest. These elections were of capital importance for several of the members of the Ibex. Specifically, at the end of 2019, the US market contributed to Grifols, ACS, Acerinox, CIE Automotive, Banco Santander, Iberdrola, Ferrovial and Repsol total revenues of 45,983.5 million euros, with Grifols and ACS being the most exposed in terms of percentage over all of them, assuming 66.5% and 49.62% respectively. None of these companies fell on the stock market in the week.
Looking ahead, Didier Saint-Georges, managing director and member of Carmignac’s strategic investment committee, affirms that beyond the uncertainty in the short term about the final result, which may lead to shocks and chaotic news flows, the The market will have to deal with the same complex landscape that it faced before. “A delicate balance with economic growth called into question by the challenges of the pandemic, doubts about the magnitude of fiscal stimuli, the imperative intervention of central banks and the hope of finding an effective vaccine sometime next year. This kind of continuation of the situation will continue to act as an impetus for the valuation of high-growth listed companies ”, he adds.
Although they did not appear at the polls, different sectors of the market also participated in the American presidential elections, and as in politics, they have their own winners and losers. In the S&P 500, big technology and pharmaceuticals emerged as the sectors that benefited the most from the Democrat’s non-overwhelming victory, with weekly increases of more than 15%, while oil and construction closed with weekly falls.
In Europe, all sectors had rises within the Stoxx 600 for the week. Insurers (+ 8.79%), financial services (+ 8.57%) and construction companies (+ 8.42%) were in the highest part. In the lower part, banking (+ 5.57%), travel and leisure (+ 5.26%) and telecommunications (+ 3.09%) registered more timid increases. The European automobile sector, very aware of the result due to the latent threat of a tariff increase that Trump wielded on different occasions, closed with a rebound of 7.39%.
The profitability of debt securities in the secondary market also served as a thermometer. At the time of greatest uncertainty reached on Tuesday, the US 10-year bond came to offer 0.901%, a maximum that had not touched since March, when the worst of the pandemic was ravaging Europe and began to expand in the US as well. At the close of Friday, the 10-year bond was around 0.82%.
In the case of Europe, the German bund rose slightly in negative territory. Thus, the previous Friday it offered -0.627% and at the end of this week, it was at -0.621%. The Spanish 10-year bond stood at 0.097%, a new low for the year and a very short distance from its lowest level in history, the 0.035% that it paid in August last year. In addition to the political earthquake, investors are taking into account the words that the President of the ECB, Christine Lagarde, spoke last week, when she left open the door to more stimulus in December.
If the week prior to the elections, the dollar had gained strength against the euro amid investor fear, since that same Tuesday the US currency fell sharply, discarding the rebound that had caused the second wave of the pandemic. The community currency, which started the week trading at $ 1.1647, ended up increasing its relative value by 2.05% to 1,188 greenbacks, a level that had not reached since August and which is close to the highest of the year.
Regarding the Mexican peso, a currency that suffered greatly when Trump won by surprise in 2016, it managed to revalue in the week. Specifically, it ended with an exchange rate of 20.84 pesos per dollar from 21.17 pesos the previous week.
The waters returned to their course also on this front. The Vix volatility index rebounded the week before the elections to 34.27 points, levels that it had not marked since April. However, it ended last Friday at 26 integers, the level at which it has been fluctuating since the worst of the virus happened.
Oil is one of the commodities most sensitive to market sentiment. As soon as the uncertainty dissipated, the oil returned to its being. A barrel of Brent started the week from $ 37.46 and ended at $ 39.43. In the case of gold, the refuge par excellence, the metal followed a trend diametrically opposite to the symptoms of relaxation reflected in the rest of the market. While the logical thing would have been for the ounce of gold to depreciate due to the general relaxation, it became more expensive during the week from $ 1,878.81 to $ 1,954.15. “We think the dollar will continue to lose ground, but it shouldn’t be enough to drive a longer-lasting gold rally as we project higher bond yields and lower demand for safe havens,” said Carsten Menke, head of future trends at Julius Baer.