New Year, New Hope … New Markets? A Look Back at 2020

Peter Bukov

As the sun sets on 2020 we’re looking back on the year gone by, and contemplating what could be in store for the financial markets in 2021.

Major events like Biden’s presidency and the Covid vaccine are expected to have a positive impact, but will they? Before we answer that, let’s take a quick look back at what the past year has been like for the financial markets.

2020: A Year of Many Surprises

If there’s anything we’ll remember from 2020, it’s how the Coronavirus changed our lives and forced the world into a lockdown, unseen in modern times. We adopted new health guidelines, social distanced, self-isolated, and experienced complete lockdowns in an effort to stop the spread of the pandemic.

Financial markets 2021From a psychological and social aspect it’s all been a nightmare, from a financial point of view, there’s been ups and downs. Markets fell fast, the fastest fall in the stock market history since the Great Depression of 1929. Covid sparked off a crash in February 2020 that continued on through April. But, 2020 also brought along unprecedented surplus programs and monetary injections into the economy that sent some assets to their all-time highs.

Assets that skyrocketed

On January 2nd, 2020 gold prices were $1528.95 and by August 5th prices they’d broken past the $2000 barrier reaching $2036.82, with a few small dips in between. FAANG (Facebook, Amazon, Apple, Netflix, and Google) stock prices skyrocketed.  The Dow Jones topped 30,000 for the first time, and the crypto market, especially Bitcoin, saw a significant rise.

Assets that dipped

By April 20, WTI prices went -$37.63. It was the first time in history that oil prices dropped below zero and have not since surpassed the $50 mark.

Luckily, the bears were around for a short period, and the markets began to stabilize in April, and now at the end of 2020 they are still stabilizing.

CFD traders were able to trade on the downfall as much as the increase. Some brokerage firms introduced brand new oil indices, connected with WTI and Brent to combat negative prices. The market hasn’t seen a negative number since.

2021: A Year of Hope?

While 2020 taught us that nothing is guaranteed, many analysts are predicting an optimistic run for the markets in 2021. That’s because of two main reasons.

The vaccines are finally here

Pharmaceutical companies have already started rolling out their Covid vaccines. In the UK people have started receiving the vaccine and tens of millions of people are expected to receive the vaccine within the next few months. People in the US will begin receiving it by the end of December 2020, and several countries are scheduled to follow suit.

If the vaccine managed to control and lower the spread of the virus, this will lead to eased lockdowns, it will reopen many countries, and return life to many industries such as the tourism and events industries. The return of spending will in turn affect the market.

Trump is out, Biden is in

On January 20, Joe Biden will be sworn in as the 46th president of the United States. Any new presidency tends to affect the market, but this specific presidency means President Donald Trump is out, and his effect on the market has been massive. While markets did see a lot of highs during his four-year term, towards the end of his term, the USD has been weakening.

Many hope that his presidency will stabilize the economy. However, this depends on who controls the senate. If the Republicans take over the Senate, Biden would likely face difficulty introducing a larger economic stimulus package. However, trade relations will improve with Europe and possibly China. This would create a better business atmosphere, and the markets will see a rise.

Does the new year mean a new start of the market?

The two currencies that investors will be focusing on are the USD and Euro. Europe will likely recover from Covid earlier than the U.S, so the EUR could continue rising against the USD. The first few months will be tough, but it could rally throughout most of the year.

The USD went up in March 2020 due to a rise in demand, but as the vaccine develops and everything goes back to normal, the USD may further decline. 

Let’s not forget about technology and FANNG stocks. They’re expected to jump. Experts are also suggesting a rise in bank shares like the Bank of America, Qualcomm, and Exxon as the world returns to normal - if it does.

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Peter Bukov
Peter comes from a background in corporate finance which began in 2013 when he completed the Corporate Finance Program at the University of Economics in Bratislava. He’s been actively involved in the market sector since 2008 and got his hands-on experience in trading in 2011.

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