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Weekly Manager Views: Equities

30 October 2020

At GAM Investments’ latest Equities Meeting, held on 27 October, our managers shared their views on Covid-19 vaccine developments and equity markets globally.

Dr Jenna Denyes – Healthcare Equities

Pfizer announced this week in their Q3 earnings call that the data for their ongoing Phase III Covid-19 vaccine trial remained ‘unblinded’. This means that the required number of Covid-19 infections (32) had not yet been reached, and the trial was ongoing. As a result, we still do not have any further insight into the efficacy of the vaccine, but this is still good news. If they had passed the interim analysis and not shared the data, it could be reasonably assumed that the vaccine was not yet suitably effective. The general response to the news has been neutral. Pfizer has guided that the safety package would be available by the third week of November, and we anticipate the efficacy data will also be available by then, at the latest. The other leading programmes are on track, with Moderna announcing that patient enrolment is complete, and AstraZeneca enjoying the re-start of their American cohort. Healthcare as a sector is still suffering an overhang from the imminent US presidential election, and a successful vaccine trial readout would be a strong positive for the pharma / biotech / medtech space, if not the market as a whole. While we see limited direct commercial benefit from the development of a successful vaccine, it goes without saying that world is waiting with bated breath to see if a vaccine will offer us a way out of the ongoing crisis.

Gianmarco Mondani – Developed Europe Long / Short Equity

It is currently challenging to make short-term investment decisions. There are a number of events (Brexit, US elections, vaccine developments, re-introduction of lockdowns) with unpredictable outcomes. Given the resurgence of Covid-19 cases and new lockdowns, particularly in Europe, stock performance hinges on news flow relating to a vaccine; in the event that vaccine news is positive, there are areas of the market (office real estate, suppliers to restaurants, gyms and cinemas) which could bounce. But we believe many of these areas face structural problems that will persist even after a vaccine and any rally will be an opportunity to sell. If vaccine news is negative, other sectors which have outperformed in recent months (such as tech) may benefit. Therefore, the ability to react quickly remains important.

Ernst Glanzmann – Japanese Equities

Recent results from corporates in Japan are, on average, above expectations. It appears that a ‘V’ shaped earnings recovery is occurring, as reflected in the performance of the Topix Index, which has largely followed the path of company earnings. In our view, the sales exposure many Japanese companies have to both Asia and the US could lead to a strong relative performance for the Japanese stock market, even with rising Covid-19 cases globally as long as lockdowns can be avoided in these core regions. We are, however, in uncertain territory and remain somewhat cautious.

Ali Miremadi – Global Equities

Given the performance of equity markets during 2020 during a period of broadly lower earnings, valuations have clearly risen, and this includes cyclically exposed parts of the market. In fact, we have already witnessed significant recoveries in select cyclical names in various areas of the global economy, including construction, logistics and mining. In our view, at this stage there are very few good businesses which could be described as ‘cheap’, aside from areas of extreme value (energy, banks, aviation) which continue to look challenged. Our view is that it is vital as ever to focus on corporate fundamentals and identify good businesses trading at material discounts.

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development. The companies listed were selected from the universe of companies covered by the portfolio managers to assist the reader in better understanding the themes presented. The companies included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice.