Welcome to our latest investment commentary covering the third quarter of 2020. This update provides some more in-depth commentary on the markets and our views moving forward.

Q3 2020 REVIEW

Market Performance

The markets have generally been positive over the quarter, although performance has been more muted when compared to the recovery seen in Q2. We were active at the beginning of the quarter, where we allocated some of the cash in the portfolios to the themes we have been introducing.

What has been particularly evident is the dispersion in performance since June. Up until then, most markets were simply in a recovery phase and were all rising. However, since June, some markets have done better than others creating large performance gaps. An example is the FTSE 100, which is currently down 20% this year but the main US market, the S&P 500, is up 5%.

FTSE 100 vs S&P 500

There are several reasons for this difference. The first is that the UK has been economically impacted by the pandemic more than the US has been. The second is that the response from the US Federal Reserve and US Government has had a more positive impact than the equivalent UK response. The third and perhaps most important point is the composition of the S&P 500 compared with the FTSE 100.

The S&P 500 has a large weighting to the Technology sector, in which many companies have benefitted from the pandemic and have therefore performed very well this year. The largest stock positions in the S&P 500 are Microsoft, Apple, Amazon, Facebook and Alphabet; quite a list! In contrast, the FTSE 100 has very little exposure to the Technology sector but instead has exposure to a number of companies that have been significantly impacted. This difference is important to note and we will cover more of this in the Outlook section later.


We have seen some form of economic recovery over the quarter, following the opening of economies earlier in the year. However, in most cases, we remain well below the levels of activity seen prior to the pandemic and it is now a consensus view that the recovery will be long and slow, with plenty of uncertainty along the way. The second waves of infections that have emerged in Europe and the UK are a good example of the challenges ahead, particularly as we head into the Winter months.

COVID-19 Vaccine

There appears to have been some progress made on the vaccine front, with companies such as Moderna reporting good results so far. Moderna is a company owned in some of our portfolios via the Baillie Gifford Positive Change fund. AstraZeneca are also close to a vaccine in collaboration with Oxford University, although progress was halted following a test patient falling ill with unexplained neurological symptoms.

US Election

The limelight is gradually being taken though by the upcoming US election, which is next month. So far, it seems to be a close contest, with Biden ahead. There have already been a number of twists and turns and given the candidates involved, this is unlikely to be an orderly affair potentially leading to some volatility as the time nears.


Political Volatility

In continuation of our political volatility theme from the previous quarterly note, this will become more acute as we approach the election next month. Given Biden now looks like he could win, this is likely to create some volatility around the time of the election. Biden has made it clear that US corporate taxes should be higher and so a Biden win could lead to a correction in the markets to reflect the potential for this to happen.

As mentioned in our previous note, it is likely that Trump will not go down lightly. Based upon his recent comments and actions, particularly during the first debate, this is becoming increasingly likely and so adds weight to the possibility of volatility ahead.

We have been preparing to invest the remaining cash in our portfolios and feel it is sensible to monitor the build up to the US election before deciding how to allocate this.

Thematic Approach

As mentioned in our recent notes, we are focussed on particular themes that have emerged from the pandemic. The divergence in performance we spoke of earlier is evidence of why this renewed approach is required.

Many of the businesses in those winning sectors have become stronger through the pandemic and tend to be associated with the ‘new’ economy. Cloud computing is a good example. In contrast, many industries were already under pressure from disruption and the pandemic has only weakened their position further. Examples include high street retail and traditional banking. Many businesses within these and other affected sectors may never recover.

We have already made good progress in this transition to the desired themes and are excited about the new additions we have lined up such as investments providing exposure to the growth in Cloud Computing.

To further support this move, when a vaccine is eventually finalised it could take a long time before mass vaccinations occur as has been indicated by the scientific community. Furthermore, it is unlikely that all will be willing to take the vaccine and so it is possible that COVID-19 will be disruptive for longer than we think.


We have been repeatedly asked about our thoughts in relation to the pandemic and the emergence of additional waves, weak economic data, the delay in finding a vaccine and of course the upcoming US election. Clearly, the US election is an unknown but in response to the other points, we are positive about the themes we have discussed and believe they are well positioned. We believe those themes will go from strength to strength in the months and years ahead.

Furthermore, Central Banks across the world have opened the flood gates and remain in an accommodative stance. The US Federal Reserve have indicated that they will continue to inject monetary stimulus into the system and are unlikely to raise interest rate until 2023. We are also likely to see ongoing fiscal support from Government’s and so the backdrop appears to be very supportive for the foreseeable future.

As per our previous quarterly note, in aggregate, we feel more positive about the medium-term outlook for the markets and sectors we have mentioned and are excited about the new funds being brought it. The lead up to the US election could lead to some volatility in the markets but we will be looking to take advantage of this with the remaining cash in the portfolios.

We appreciate that little has been mentioned of Brexit. The reality is that the outcome won’t have much of an impact on our portfolios given the diversification in them. We do have some exposure to the UK, but the nature of this will shortly be adjusted to mitigate against any no deal scenario, which has once again been threatened.

We will shortly be making changes to our portfolios where we are seeking to switch out of our exposure to UK mid caps and into UK smaller companies, who appear to be better positioned to weather the current climate. Please keep an eye on your inbox for the fund switch notification.


As mentioned, we have made some changes during the quarter. A full account of the changes can be found below:

Portfolio Changes Q3 2020

We hope you find this review informative and look forward to hearing from you if you have any questions.

This publication has been prepared for information purposes only by Carrington Investment Consultants Ltd. The value of investments, and any income generated from them, will be affected by interest rates, exchange rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. Investors should be aware that the value of units may well fall as well as rise, is not guaranteed and that past performance is not a guide to future performance. Different funds carry different levels of risk and investors may not get back the full amount invested.