When we look back at 2020 from a financial perspective, it can be easy to say it was a completely phenomenal year that has never happened before.
But that’s not the case.
2020 is a year that I’d expect to happen roughly once or twice a decade because, from an economic viewpoint, it’s happened before.
It happened in 2007 with the credit crunch which was terrible for markets, but we recovered. Before that, it happened with the tech bubble burst in 1999–2000. This was another terrible time for the market for a couple of years, but markets flourished when we recovered.
Now, I don’t want to neglect what’s happened in 2020. Lockdown and its effect on our mental health and the death toll of COVID-19 have been terrible to deal with.
However, this blog aims to recap the events of 2020 purely from a financial point of view and explain what actually happened to the markets over this most unusual year.
Ups and downs
If we look at the markets in 2020, we can see a record-breaking fall followed by a rather unsurprising record-breaking recovery. Years like these go to show just how resilient things like markets, institutions, businesses and economies can be when pushed to the limit.
Let’s start by looking back on the state of the market before the pandemic hit. To do that, we need to head back to 2018 quickly.
Early on in 2018, the market fell, recovered, then fell again through September–December which made it a loss for the FTSE 100 and most other developed markets.
Then in 2019, we expected fast recovery, which is what happened in the beginning. The general feeling was, “With everything we’ve had with Brexit, what’s the worst that can happen?”
We were about to find out…
COVID-19’s effect on the markets
The FTSE 100 was well priced in December 2019–January 2020 and everyone expected to have a pretty good year. What ensued were a couple of really great months where the market reached an all-time peak (around 7800 points), and things looked promising.
Then, everything started to get a lot more serious when COVID-19 hit. Really big markets started to take some massive falls. For example, the FTSE 100 and American markets dropped over 40%!
The real lows of 2020 came around April–March time. There was one fortnight where if you were tracking the UK market, you were down 40% in a matter of weeks. On one day the FTSE 100 was down a whole 11% too!
Some funds thrived
However, even during these lows, there were some great examples of really high performing, well-placed funds, particularly one commercial property fund – BMO Property. It made about 5.5% within a month when the market went down, which was incredible!
Apart from that though, pretty much everywhere else was showing losses. That’s when we started looking at the figures and wrote to our clients, encouraging them to put their money in the market, as we predicted it would perform incredibly well.
And I’m pleased to say some of the market did.
Join me next week, when we will find out why investing in the market during such volatility turned out to be a very wise choice.
I hope this was useful. Feel free to email me directly for any further information at firstname.lastname@example.org
The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.
The value of an investment can go down as well as up. Past performance is not a guide to future performance.