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Thus, a fairly clear outcome in the US elections and promising results from vaccination trials would, by themselves, probably not have justified the stellar bounce in oil stocks (see number of the week). Yet considering how close investors had been to capitulation at the start of November, the reaction becomes more understandable.

This is all water under the bridge now, and the investment crowd is moving on to what is ahead in December and 2021 overall. The biggest question remains whether the recovery of beaten-down laggards will continue to reverse in the months ahead. For now, we assume that the recovery does have legs but that it may be more advanced than the recent bounce might suggest. After all, most of the sectors sensitive to the business cycle (i.e. ‘cyclicals’) started to outperform the market already more than six months ago. Our technical analysts, for their part, highlight that even in a more sustainable recovery, oil and bank stocks would tread water into next year before gaining further relative momentum. Therefore, there is no rush to chase them for now.

Instead, we focus on some more immediate opportunities. In the currency space, we see a weaker USD as the driving force going into 2021, particularly against the low-yielding European currencies, given that the USD has lost its yield advantage. The emerging market space does not seem attractive overall, as it is still in crisis-fighting mode and has only a minimal yield advantage. The towering exception is China, which is far ahead in managing the crisis while offering an attractive yield pickup. As for stocks, we prefer the smaller names in Europe, since they are more closely linked to the economic recovery there.