Welcome to a new year! We hope you had a healthy and safe start to 2021.
Last month was a dramatic end to what can only be described as a challenging year. Read on to see what happened in December, how investments performed and what it all means for you. You can also tune into our 2020 year in review webinar tonight at 6:30 p.m. by signing up here.
So, what happened in the markets last month?
- The pound rallied to its highest value of the year against the dollar in the lead-up to the final Brexit deal being announced on 24th December.
- Vaccine progress continued with the UK becoming the first country to start a mass coronavirus vaccination program. By the end of the month, the Oxford-AstraZeneca vaccine was approved for release in the country.
- Global stocks reacted to the discovery of a new variant of COVID-19 with many countries temporarily shutting their borders from UK travel and trade.
- After months of debate, the US Congress passed a $900 billion coronavirus relief package.
And how are investments performing?
Stock markets ended the year on a high note despite the ongoing health crisis and global economic recession. Why? Because the stock market isn’t a picture of the present. It reflects what investors think is going to happen in the future. Anticipation of vaccine progress, a Brexit deal being finalised and the continued success of technology companies to profit in the new ‘normal’ increased investor optimism in December.
Diversification was key for investors during such a tumultuous year where the businesses that are doing well right now (think big tech) are overrepresented in the stock market, while the businesses suffering are likely private (your local pub) or haven’t been able to operate in a locked down world (the entire travel industry). This meant that positive performance across markets wasn’t distributed equally which you can see in the below snapshot of how indexes around the world performed in 2020:
- In the UK, the country’s largest stock index, The FTSE 100, declined 14.34% for the year despite strong gains in the post-March rally. This was largely due to Brexit uncertainty and a lack of exposure to the global tech sector.
- In Europe, the pan-European STOXX 600 dropped by 3.8%.
- In the US, the S&P 500 index gained 16% for the year and the tech-heavy Nasdaq saw record-level growth of 43.6%.
- The MSCI World Index, representing companies across 23 developed markets, rose by 14% for the year.
At Wealthsimple all our portfolios saw positive growth in 2020 with full performance details available here.
Lastly, what does all this mean for me and my money?
It’s a new year and many of us likely have great intentions for our money in 2021. But given the challenges of the past year, you may be asking: with interest rates at historical lows and saving accounts earning almost nothing - how do you keep your money making money?
We got slightly nerdy with Wealthsimple’s Chief Investment Officer Ben Reeves before the end of the year to better understand how to think about where to save or invest your money in today’s economic climate. Read the full article here.
Thanks for staying the course with us and remember, we're always here to help. Email firstname.lastname@example.org or book a call with a member of our investment team here.