The year 2020 will undoubtedly go down in the history books for several reasons. By now, there are a few catchphrases that have become part and parcel of our everyday lives. These include: COVID-19, flattening the curve, quantitative easing, social distancing, herd immunity, second-wave, new normal, “you’re on mute”, “can you see my screen” and our personal favourite, “in these unprecedented times.”
In all seriousness though, these really are unprecedented times. In late December, rumblings of a virus in China began. Most of us didn’t give it a second thought, and the general expectation was that it would be contained, and have little or no impact on us. However, by the middle of February, COVID-19 had spread like wildfire across the globe causing fear and panic amongst both health professionals and financial markets. Leading into March, we saw one of the sharpest equity downturns in the last 100 years, as countries closed their borders and shut down their economies. For the first time, this market crash affected almost all asset classes. Oil futures contracts went negative for the first time in history. The Rand reached an all-time high of R19 to the dollar. Record after record was being broken, almost daily.
In the midst of this all, racial tensions in the US flared when George Floyd was brutally murdered at the hands of a white policeman. A social movement known as “Black Lives Matter” gripped the world as protestors took to the streets to voice their racial concerns and feelings.
What was widely expected to be a “U-shaped” (i.e. slow) market recovery has, in fact, turned out to be a “V-shaped” (i.e. fast) recovery. In the second quarter of 2020 markets rallied as investors weighed up the effect of the virus on global economies, versus the sheer weight and power of the various central bank’s stimulus packages. More than 8 trillion dollars were pumped into global financial markets in three short months. Today, markets around the world are almost back to levels that seen in January.
While we have no crystal ball, the reality is that the world has not returned to normal, and both counties and companies still need to go through this fundamental shift of figuring out what this “new normal” entails. Some may survive, and some may fail. While China may beat us all to shifting back to positive growth (GDP) numbers, we suspect that a vaccine is the only route to finding our new form of whatever “normality” is. While there is a major race and competition going on in finding this vaccine, it is only likely to be ready next year sometime. Given all of this, it is hard to believe that we are out the woods.
Does that stop us from investing? No. There are still growth opportunities out there, and it simply means that we invest with caution, and there are various strategies to do so. This is something that you need to seek professional advice on.
So, yes, a record-breaking 2020 so far, and the year has certainly not turned out how we expected, in more ways than one. While we are on the road to recovery in terms of markets, and a vaccine seems to be in our reach, economies will take some time to fully recover and stabilise. The stimulus packages have been a saving grace to economies and markets; thus, for now, we bank the recent gains and wait to see what lies ahead.
Chartered Wealth Solutions is an authorised financial services provider
(FSP no. 13909)