2020 Market Review

Back in January, Covid-19 was a regional virus, and few predicted that it would be the cause of an unprecedented and extremely challenging 2020 for people, businesses and economies. The crisis has also been a tumultuous experience for investors as it forced the global economy into its deepest recession in peace time. The scale of market volatility was underlined by the Dow Jones Industrial Average plunging by 37% during the height of the pandemic in March, before staging a stunning recovery with a rebound of 62% in November to reach a record high. In the UK, the FTSE 100 started the year close to a record high, before falling by 25% in the three months to the end of March and then bouncing back somewhat on stimulus and news of an effective vaccine. 

There is no doubt that 2020 was a difficult year for almost everyone. The global lockdowns during the Covid-19 pandemic resulted in a deep contraction for the global economy. In the UK, we saw business closures, job losses and rising government debt. Most economies made a start getting back to normal once lockdowns were lifted before further waves of the virus brought more restrictions. 

Looking ahead, the prospects for 2021 look brighter – offering the prospect of a return to normality, and with that greater certainty. Governments will remain focused over winter on containing Covid-19 outbreaks, and there are logistical challenges to tackle as the various vaccines are approved, distributed and administered. However, the greater confidence resulting from the vaccines, alongside continued technological innovation, and a recovery in global economic growth should provide a positive landscape for investors. The incoming Biden presidency also heralds a return to international co-operation and efforts to combat climate change. 

As many have observed before, the pandemic has accelerated a number of pre-existing trends. Technological innovation will continue to thrive after the pandemic and we will see an era of further change to the way we work and live. Online behaviours are likely to remain, particularly with a structural shift in habits and trends with far greater numbers of people shopping online, using technology and working from home. 2021 offers the path back to normality, but with the potential to make that a new normal, incorporating features of the connected world that was forced upon us. 

As we emerge from the crisis, we expect the year to be characterised by a period of sustained recovery, and growth across major equity markets. This cycle has played out plenty of times before. For example, in 2010, following the global financial crisis when investors were unsure of the sustainability of market growth we were in fact seeing the start of a long bull run. 

Of course, how quickly vaccines can be rolled out, and the speed at which the world can recover from the impact of Covid-19, remains to be seen. With the dramatic recovery in equity prices in November, good news is now increasingly priced in. That inevitably means there is a risk of disappointment for example, if the recovery from the crisis is slower than people have hoped. This suggests we should not discount potential volatility in the near term, but overall, we expect economies will see a boost from pent-up demand as people start to spend again, and sectors start to recover. 

In summary 

We can’t know what will happen next year, but we know what is likely. We anticipate that 2021 will see a less bumpy, sustained recovery, in which sectors affected by the pandemic will improve. There are enough positives to suggest that equities will outperform bonds and cash. However, if 2020 has taught us anything, predicting the course of a pandemic is difficult, even for experts. While some challenges remain, we are alert to the opportunities and challenges that these present. That is why we recommend well diversified portfolios of asset classes and geographical regions. 

We would like to wish you all a very Merry Christmas and a prosperous and healthy New Year. We at gpfm are grateful for the continued support of our clients and are looking forward to the year ahead. 

If you would like to talk to a member of the team here at gpfm, please don’t hesitate to get in touch over email enquiries@gpfm.co.uk or call 01992500261. Our offices will close for the Christmas period on Thursday 24 December and will re-open on Monday 4 January. 

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested. 

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About gpfm 

gpfm are an independent financial planning company dedicated to the provision of personal, professional, and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.