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Looking back at 2020, looking forward to 2021

By Occitanie
This article is published on: 12th December 2020

Welcome to the 8th edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Philip Oxley, Sue Regan, Rob Hesketh and Derek Winsland, your Spectrum team of advisers in the Occitanie.

2020 has been a year like no other we can remember. We have had a global health pandemic with tragically unprecedented levels of deaths in peacetime and significant changes for many people in relation to both their work arrangements and social lives, notwithstanding challenges in relation to individuals’ physical and mental health.

In the financial world, economies have suffered deep recessions and economic rebounds within the space of months. All financial markets plunged sharply in March, but many have recovered those losses, and more, with the US Dow Jones index recently breaching 30,000 for the first time ever. In the UK, the recovery of the FTSE 100 has been more muted and even with advances in the last few weeks, the index is still currently down about 15% from its starting point at the beginning of this year, although there are still a few weeks to the end of the year for the market to surprise!

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Perhaps the single most positive piece of news in 2020 has been the recent succesful trials of a number of Coronavirus vaccines. With approval granted by the MRHA, the UK’s medicines agency, for the Pfizer/BioNTech vaccine, there are 800,000 doses heading to the UK with care home residents and staff thought

to be at the top of the list of recipients, followed by the over 80s and healthcare workers.

There are many other vaccines in the pipeline with Moderna and AstraZenica/Oxford University vaccines thought to be close behind in the approval process. Vaccines from Johnson & Johnson and Novavax are both in the final Phase 3 of trials, China has at least three and Russia one, which are all undergoing trials currently.

Interestingly the storage conditions and price vary greatly, with the Pfizer/BioNTech vaccine requiring about -70°c conditions, dilution before administering and is thought to cost in the region of £25 per dose. The vaccine from AstraZeneca & Oxford University, however, can be stored at fridge temperatures for up to six months, with an estimated cost of about £3 per dose (because the company has committed to distributing the vaccine at cost, during the course of the pandemic). On the day the company announced the results of its trials, the markets somewhat cruelly knocked nearly 4% off the company’s share price! Some confusion over the vaccine dosage and efficacy results didn’t help, but supplying the vaccine at cost is not going to provide the profits boost that investors might have expected.

2020 elections

Politically, both Biden and Trump registered more votes each than any other US President in history. Whilst Biden undoubtedly won this contest (despite Trump’s protestations), Trump and his views clearly still resonate strongly with many Americans. Politics aside, the economy, employment and equity markets have actually had a particularly good run under Trump’s stewardship. However, the markets have also taken the Biden victory in their stride. Despite what was said during the heat of the election campaign, Biden is a moderate and the response of the markets shows that also to be the view of most investors. The markets’ reaction was also supported by the likelihood of a Republican Senate (still to be determined) which will act as a check on any of the more radical instincts of the new administration. Much of the world will welcome the likely return of US support for the World Health Organisation (WHO) and the Paris Climate Accord.

Closer to home, Boris Johnson’s stock has plummeted from a comfortable election winner only a year ago, to talk of grumbling amongst his own MPs. There has been speculation of possible moves against him by his own MPs, although if this dissention does snowball, it will probably not be until 2021.

President Macron has been busy on the world stage in recent months; although interpreting the polls would suggest the French people would rather he focused on domestic matters instead. His popularity has improved from lows seen previously, but the numbers who disapprove still outnumber those who approve of his presidency and polling on people’s voting intentions for the 2022 Presidential Election show him only a whisker ahead of Marine Le Pen. But with nearly 18 months to the end of the President’s term, much can still happen.

As this article goes to press, negotiations are still ongoing between the UK and the EU. Many areas remain unresolved including fishing rights (which seems to be one of the key sticking points in the deal, particularly due to Macron who,according to press reports, is the chief instigator behind the EU’s tough negotiating stance) as well as many other aspects of the UK’s future relationship with the EU. One item that has been clarified recently, however, is in relation to French residents in possession of UK driving licences. It has been confirmed that these will need to be exchanged for French licences, but those affected have until 31 December 2021 to secure their new licence. UK nationals who have driving licences from another EU country do not need to make this switch.

Remaining on the subject of Brexit, one of the “go to” financial products within the expatriate market for pensions has been the Qualifying Recognised Overseas Pension Scheme (or QROPS). Since its inception 14 years ago, HMRC figures indicate there have been over 130,000 transfers and the average transfer value in 2019/20 was £125,000. This useful financial planning product has an uncertain future after the end of this year. From 9th March 2017 transfers to and from a QROPS became liable to an Overseas Transfer Charge (OTC) of 25%, unless one or more of five conditions was met. One of those conditions was that the pension member was resident in a country within the European Economic Area (EEA) and the QROPS was established in a country within the EEA. This meant that whilst the QROPS remained an attractive proposition to many expatriates within the EU, the number of individuals who went ahead with a transfer to a QROPS and paid the OTC in the tax year 2019/20 was only 13, according to an article published by Canada Life. The UK left the EU on 31 January 2020 and also left the EEA (the EEA comprises all EU member countries plus Iceland, Liechtenstein and Norway). The transition period agreed in the Withdrawal Agreement requiring the UK to be treated as an EU and EEA member, and bound by the rules of both, expires on 31 December 2020. It seems that this may mark the effective end of the QROPS, although we wait to have this confirmed. Fortunately, an International SIPP is still available to those looking for favourable solutions for their UK pension schemes and this product can provide many of the advantages afforded by a QROPS.

2021 finances

One of our favourite quotes about predicting the future in relation to the world of finance is from the late J.K. Galbraith, who was for many years the Professor of Economics at Harvard University. He famously said that “The only function of economic forecasting is to make astrology look respectable”. For that reason, we will focus on possible trends rather than predictions!

The positive vaccine news has already seen a surge in value to those stocks in sectors that have been battered for most of 2020 – leisure, transport, hotels, restaurants, cinemas etc. It is also likely that prices in banking stocks will stabilise or possibly recover further. Furthermore, it is probable that a lot of the old traditional stocks such as oil, industrials, consumables etc. will improve as we move into 2021. What is not so clear is whether those technology stocks, seen also as “stay at home” stocks (Facebook, Alphabet, Apple, Amazon, Microsoft, Netflix etc.) which have had a stellar 2020, benefitting from the impact of Coronavirus, will continue to power ahead or take a breather in 2021. With regard to some of those sectors that were hit badly this year (hospitality, cinemas, airlines etc.) it is also unclear whether the change in consumer behaviour seen this year is here to stay, in which case any recovery in these sectors may be limited in scope.

Gold, seen as a safe haven during this year’s turbulence, fell back sharply with news of vaccine progress, but has recently stabilised, whereas Cryptocurrencies have strongly advanced in value over this period. It is difficult to assess the future direction of either of these assets, but as the vaccines get rolled out and economies improve, the predictions earlier this year that gold could reach $3,000 per ounce seem unlikely, in the short term at least. What can be predicted with more confidence is that there will still be volatility in the markets, because whilst they have been buoyed by the vaccine news, in the “real economy”, the fallout has yet to be properly felt.

Unfortunately, rising unemployment is inevitable, as are tax increases at some point, to start to chip away at the mountain of debt that has accrued through increased government spending and falling tax receipts. There has been much talk about the shape of the recovery, e.g. “V”-shaped, “U”-shaped, “W”-shaped (reflecting a double-dip recession) or even a reverse square root (unfortunately not an available button on this author’s keyboard!). The answer seems increasingly that all of these may happen depending on the country, the market sector or the company.

What we would comfortably recommend however, is to stay invested in the markets. To conclude with another well known quote from Warren Buffett, now 90 years of age and considered one of the world’s most successful investors, “The stock market is a device for transferring money from the impatient to the patient”.

We wish all our readers a very happy and healthy Christmas and we hope 2021 will be a better year for all. We will be back in touch again next year.

If you have any comments or questions, as well as suggestions for future topics for our newsletter, we’d love to hear from you at Please feel free to pass this on to any friends or contacts who you think might find the content of interest.

Article by Occitanie

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