Equities: The market can rally further – UBS

The MSCI All Country World Index returned 12.2% in November, its best-ever monthly performance and has gained a further 2.4% in December so far. Economists at UBS see further upside based on widespread vaccine availability in 2Q21, a broadening of the economic recovery, additional US fiscal stimulus and continued global monetary policy support. 

Key quotes

“Equities can rally further and that investors should look through the near-term uncertainty created by rising case numbers and hospitalizations. Our view is based on widespread vaccine availability in 2Q21 allowing an easing of restrictions and a broadening of economic recovery, additional US fiscal stimulus and continued global monetary policy support.”

“Rollout of the Pfizer/BioNTech vaccine begins in the UK this week. The US Food and Drug Administration also meets this week to discuss an Emergency Use Authorization of the Pfizer/BioNTech vaccine and Vice President Mike Pence has said that distribution could begin next week. On 17 December, the FDA meets again to discuss Emergency Use Authorization for the Moderna vaccine.”

“US fiscal talks appear to be making progress on a USD908 B bipartisan stimulus package, according to press reports. Hopes for a deal before January were raised on Friday as weaker-than-expected non-farm payroll data prompted a rally in both US equities and yields. Investors appear to be taking the view that slowing labor market momentum may provide a catalyst for dealmakers to reach an agreement. The European Central Bank also meets this week, having already pre-announced a recalibration of policy, with an extension of its bond-buying program expected.”