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Pre-election rally. Feliciano Macías. Investment advisor Renta 4 Málaga

Rise in the main equity indices, which are recovering levels after the falls at the end of September. Investors showed a positive bias considering that this week there has been no progress in the negotiations on the fifth stimulus package and that voting intention polls in the US place Biden well ahead of Trump and his party is pushing from the House of Representatives that large technology companies are segregated by monopolistic issues, clearly negative news for the sector that has contributed the most to the rises in stock markets this year.

Investors have been pending negotiations on a fifth US fiscal stimulus package, with no significant progress despite a renewed request by Federal Reserve Chairman Jerome Powell that more fiscal stimulus be added. to ultra-expansive monetary policy to support the recovery, especially following the Fed’s assertions that full employment will not return until at least 2023.

The technology sector continued to rise despite the publication of the conclusions of the report prepared by the Democratic Antitrust Subcommittee of the House of Representatives, which seeks to reduce the power of big technology such as Google, Apple, Amazon and Facebook through changes in the antitrust law. that impose partial segregation of their operations. Thus, the more aggressive approach of the Democrats regarding the big tech And it may be a welcome preview of regulatory pressures on the tech industry in the event of a Biden win.

Next week the references will not be very numerous. Price indicators for September will be released in the US and China. In addition, we will see the ZEW survey for October in Germany and the one of consumers for the same month in the US prepared by the University of Michigan. In terms of business references, the 3Q 20 earnings season will begin next week in the US. The main protagonist will be the banking sector. The market discounts that the S&P 500 picks up a drop in revenue -4.4% and EPS -21% vs 3Q 19. It is expected that less than half of the sectors (11 in total) will manage to grow in revenue, led by health sector and that all sectors suffer falls in terms of EPS.

The last quarter of the year will be especially relevant in terms of progress in the development of a vaccine against Covid-19. According to data from the WHO there are about 200 candidates worldwide, with 26 of them being tested in humans and 10 in the last phase of clinical trials. Among them, the vaccine being developed by Pfizer together with BioNtech, as well as Moderna, which began phase III trials during the summer months, stand out. The last to do so were Johnson & Johnson and Novavax, both at the end of September.

We recall that the fact that the vaccine will be used in millions of healthy people means that the data obtained must be sufficiently robust. In the case of the EMA, it has started the process of continuous review of the vaccine prepared by AstraZeneca and the University of Oxford, as well as that of Pfizer and BioNTech, a process that expedites its authorization. On the other hand, and due to the urgency in its development, the manufacturers and the European Commission have reached an agreement on the future possible adverse effects, according to which the states will compensate the manufacturers, although the responsibility will remain with the company. In the US, companies with full coverage are also protected.

In the markets, and between now and the end of the year, we believe that uncertainty and volatility will continue to reign, depending on: the evolution of the pandemic (which in turn conditions the pace of economic recovery and business results), elections in the United States with favorable polls for the Democratic candidate, and the publication of business results for 3Q20, with possible new guideline cuts, especially for 2021 in an environment of uncertainty and a downward revision of the rate of recovery of economic growth .

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