By Richard Dunbar

It seems there’s no shortage of news currently hurling markets up and down – from the

nail-biting US presidential election to Brexit talks and the race to find a vaccine.

Let’s take the US election as a start. It will certainly go down in history as one of the most controversial. Months of heated campaigning, Donald Trump’s claims about illegal votes, and the still “too close to call” counting of votes – no wonder we have been glued to our newsfeeds.

After such uncertainty, many markets bounced with relief on the first day following news that Democratic candidate Joe Biden

had won.

Termed the “Biden bounce”, shares across Asia made healthy gains with Japan’s market reaching close to a 30-year high. China’s market also rose, as investors there are hopeful Mr Biden’s win will improve relations between the two economic powerhouses, making it easier to agree trade tariffs and technology policy.

However, the differences between the two run deeper than a change of president can solve. Relations between the two will therefore remain a focus for investors.

On the same day as the Biden bounce, markets also reacted to hopeful news we’ve all been waiting for – Pfizer and BioNTech announced that the phase three trial of their vaccine showed it to be 90 per cent effective in treating Covid-19.

European markets, which were open at the time of the announcement, leapt for joy. The FTSE 100 jumped 5 per cent and stocks hardest hit by the pandemic, such as entertainment and airlines, saw gains.

It’s a good example of the reactive and sentiment-based nature of markets – moving on the anticipation of what’s to come.

That said, the extent of the bounce in some share prices was, in some cases, more of a reflection of how close investors felt some businesses were to no longer being viable without the good news of a vaccine.

It’s a hugely complicated and time-consuming process as it still has to go through regulatory assessment, production and distribution. But as we get more clarity on how the vaccine will be introduced, we can all look to the future with more clarity and a sense of hope.

However, while this greater certainty is welcome, it is also worth noting that a successful vaccine was already “baked into” most investor expectations for next year.

The Pfizer vaccine is also just one of several in the final stages of human trials. In particular, all eyes are on progress of the Oxford University/AstraZeneca vaccine, about which we should hear further news soon.

None of the other candidates have the same manufacturing and distribution capacity of AstraZeneca. The European regulator has stated that it will begin reviewing AstraZeneca’s data ahead of completion to help speed up the approval process – an unprecedented move.

Lastly, but by no means least important,

we turn to Brexit.

A lot has happened since the UK left the European Union (EU) on January 31 this year. While the pandemic has dominated headlines, Brexit has been rumbling along through its transition period. During this time, agreements, rules and regulations have stayed the same. But we are now at a critical juncture; the UK and EU need to agree a trade deal by the end of 2020. If they don’t, they will have to trade under World Trade Organisation rules and this could mean tariffs on goods.

The good news is that the headline commitment to tariff and quota-free trade remains intact. This could, if agreements can be reached, support key industries such as cars, chemicals and pharmaceuticals. However, if the EU insists on more restrictive rules, it could leave UK producers (particularly in the auto sector) with a clear disadvantage.

Different industries will look forward to 2021 with hope or concern, depending on what’s agreed (or not) by the end of 2020 – which will seem frighteningly close to many businesses.

But what is certain, at least in the short term,

is that the outcome won’t be as economically advantageous as the status quo.

Richard Dunbar is head of multi-asset research

at Aberdeen Standard Investments.