Multi-year lows, record highs, and a pandemic – 2020 by the numbers

Content provided by Beaufort Financial:

2020 was a year quite like no other. A global pandemic the likes of which has not been witnessed in our lifetimes changed the way the world works, and had a huge impact on global markets.

A huge decline in the first few months for most equity markets, and a rush to buy protection in the form of bonds and gold, was followed by record stimulus across the world from central banks as governments shelled out to companies to furlough staff.

Equities rebounded, with major markets including the US jumping to record highs. Bonds, meanwhile, move into negative territory, with many bonds now charging investors interest to hold them (rather than paying them an income).

Let’s not forget alternatives either. Gold, regarded as the ultimate safe haven, soared to a record peak above $2,000, and remains near there today. Meanwhile crypto currencies like Bitcoin saw unprecedented buying, more than quadrupling from lows in some cases, particularly as institutional investors started entering the market.

The numbers themselves are stark, and here are some of the highlights.

Equity markets break new records

US equity markets endured a bleak start to 2020, only to surge back in the second half as its huge weighting to technology stocks won out in the switch to working from home. In total, the S&P 500 rose 18.4% last year, while the tech-heavy Nasdaq index gained more than 40%. China, where the coronavirus pandemic began, also saw impressive gains in 2020, with the MSCI China index up almost 25%.

There were losers though, even as US markets smashed through record highs. The UK, blighted by both the pandemic and Brexit, struggled to make headway, with the FTSE 100 index shedding 15%, despite rallying off lows as the country reopened after the first lockdown.

A quarter of the world’s investment grade bonds now have a negative yield

As equities rallied, demand for safe haven bonds remained very much a priority for many investors (bolstered by central bank buying). By mid-December some $18.4trn of bonds were trading with a negative yield according to Bloomberg, with only US government bonds managing to still trade with positive yields across all time-horizons.

Gold

Having already risen substantially in 2019, gold’s meteoric rise continued in 2020, spurred by central banks buying up bonds by issuing more debt, and thus weakening their own financial positions. The precious metal jumped by more than 20% over the course of the year to leave the gold price just shy of $1,900 (a level it is not trading above). In truth, it could have been even better for gold, with the price actually rising above the $2,000 mark at one stage last year, before retreating late on.

Even with a year like 2020 behind us there are still many permutations of the coronavirus crisis left, meaning there is no doubt the next 12 months in markets are set to be as eventful as the last. If you would like to discuss any of the themes and ideas in this article don’t hesitate to get in touch with your adviser.