THE AMAZING PATH GLOBAL EQUITIES TROD IN 2020!

January 4, 2021

 

INDEX

2/1/20

23/3/20

31/12/20

% profit/loss

FTSE 100

7604

4993

6460

-15.04%

DAX

13219

8441

13718

+3.77%

CAC40

6041

3914

5551

-8.11%

DJIA

28868

18591

30606

+6.02%

S&P 500

3257

2237

3756

+15.3%

NASDAQ

9020

6860

12888

+42.88%

HANG SENG

28543

21696

27231

-4.60%

SHANGHAI

3085

2660

3473

+12.58%

NIKKEI 225

23204

16887

27444

+18.27%

ASX 200

6690

4546

6587

-1.54%

 

INDEX

PERCENTAGE LOSS 2/1/20 to 23/3/20

FTSE 100

-34%

DAX

-36%

CAC40

-35%

DJIA

-36%

S&P 500

-31%

NASDAQ

-24%

HANG SENG

-24%

SHANGHAI

-14%

NIKKEI 225

-27%

ASX 200

-32%

 

In September 2019, disturbing rumours started to permeate out of a little-known city, outside of China – Wuhan. It was purported that Wuhan was being savaged by an unknown virus, eventually to be known as Covid-19. The World just watched out of interest. Little did we know that this pandemic would decimate the world’s economy. The level of preparation to deal with this pandemic was derisory. There was no planning, no procuring of PPI equipment and inadequate ‘testing and tracing’ facilities. Without mincing words, this toxic virus, capable of killing a million people plus was given the freedom of the park – in fact ‘a gaping open goal!’

 

It is extraordinary to think that the only world leader, who warned against the inevitable appearance of a pandemic was made by President George W Bush back in 2005. The warning fell on deaf ears. In 2016, UK Health Secretary Jeremy Hunt was warned that in the event of a pandemic, the NHS would have a shortage of protective equipment and critical care beds. There were no funds available at that time to deal with this threat. Though the WHO was extremely tardy in declaring the pandemic on 11th March 2020, global stocks markets were rather ‘more-canny’ and realistic in accepting that there was ‘trouble at mill.’

 

A massive sell-off, not experienced since the Great Depression of 1929, manifested itself from the middle of February until 23rd March, when most of the world was in some sort of lockdown, with no travel, no aeroplanes, and no meaningful amount of goods being shipped around the world. Global stock markets, apart from China’s Shanghai Composite (-14%) shed between 24% and 36% of their value since the beginning of the year. The US economy, the largest in the free world, suffered more than most. In that period, the DJIA was down 36%, the S&P 500 by 31% and the NASDAQ by 24%. Global markets shed a total of circa $10 trillion in value.

 

US Companies from energy, travel, banking, and retail sectors were desecrated at that time. The following household names felt the wheels of pain across their backs - Chevron -55%, Exxon Mobil -56%, Boeing -70%, Delta -63%, United Airlines -72%, Expedia -56%, Macy’s -70% and Abercrombie and Fitch -53%. The situation was equally grim in the UK and Europe. The following companies saw their share price larupped in the first quarter of 2020. BP -51%, Shell -56%, IAG -69%, HSBC -25%, Barclays -55%, M&S -56%, JD Wetherspoon -33% and M&B -46%. Europe also suffered painful reverses – Societe Generale -55%, Airbus -60%, Renault -60%, BMW -50%, VW -55%, SAP -25%, Bayer -35%, Allianz -40%, Deutsche Bank -25%. 

 

UK retail was also severely under the cosh as lockdown took its toll right across the high street. Debenhams and Arcadia have fallen from grace amongst others. In total 124 retail operations have failed, with 20.620 units closing, resulting in close on 150,000 jobs being lost.  The hospitality sector was in even more disarray, shedding thousands of jobs. Oil had fallen to $11 a barrel in May but has subsequently picked up to circa $50. Investors wanted to believe in tomorrow and a ‘V-shaped’ recovery. However, it was far from clear, as to the timing of the pandemic’s disappearance.

 

The World’s Central banks were galvanised into action together with government assistance of eye-watering proportions such as furloughing schemes. Central banks vowed to keep interest rates as close to zero as possible for as long as three years, with the FED’S Jerome Powell being the most vociferous as well as active in providing gargantuan quantitative easing facilities. Global Government borrowing leapt off the scale, which with the low cost of borrowing, made the amounts borrowed within the bounds of acceptability rather diving into the world of ‘Hans Christian Andersen.’  The telephone numbers for UK public borrowing requirements, which according to the ONS could reach £372 billion by March 2021 have been well chronicled; So, no need for further elaboration, but suffice to say that some way down the line ‘the kissing will have to stop.’ Our children and grandchildren will have to pay for this eventually.

 

Who would have believed that US technology-based companies would have delivered investors out of the ‘house of financial bondage’ in the manner that they have? With lockdown, working conditions, lifestyles, education, and entertainment changed not only dramatically, but probably irrevocably. Hence technology became the ‘matinee idol’ in driving the global economic recovery process.  The gains made this year by the likes of Amazon (+72%), Alphabet (+28%), Apple (+77%), Microsoft (+39%), Netflix (+64%), Zoom (+388%), Facebook (+30%) and Tesla (+722%) were breath-taking in their magnitude. In 2020 the NASDAQ Composite has gained a staggering 43% in value.

 

The US has also enjoyed 407 IPOS this year, valued at $145 billion, including riveting debuts from Airbnb, Door-Dash, Palantir and Snowflake. The Hut Group was the UK’S largest IPO valued at £5.7 billion. The speed of the recovery process is entirely dependent on how quickly a vaccination can be rolled out to the world at large. The rejuvenation of travel and the movement of goods is of paramount importance. The UK could be well placed to ‘grasp the nettle.’ Now that a BREXIT trade deal appears to have been agreed, many companies in the FTSE 250 should provide splendid investment opportunities, despite the disappointing performance of FTSE 100, which has not been an accurate barometer of the UK’s economy for some years. 60% of its earnings are Dollar and Euro based. UK tech raised a record £11bn in venture capital this year, despite Covid-19 - More than France and Germany combined. Opportunity should knock before too long!