Such encouraging developments lifted investor confidence and raised optimism over the outlook for 2020. Unknown to all, the global economy was in store for a nasty shocker as a string of unforgettable and distressing events rocked financial markets – ultimately cementing their places in history.
2020 will be remembered for its extraordinary levels of uncertainty, unprecedented events, and periods of euphoria.
Things got messy in January when the largest economy in the world undertook a drone airstrike that killed top Iranian general Soleimani. Escalating tensions between the US and Iran fuelled fears around World War 3! Although Trump later toned down his rhetoric against Iran and even offered an olive branch, caution lingered in the air. The UK formally left the EU at 11 p.m. GMT on 31 January 2020. However, the country was given an 11-month transition period to negotiate a trade deal with the EU.
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In February, caution transformed into fear as the novel coronavirus outbreak forcefully grabbed the headlines. After infecting thousands of people in China, the virus spread its poisonous tentacles across the four corners of the world. Concerns over the pandemic sabotaging global economic growth fuelled risk aversion and drained investor confidence.
When China sneezes, the world catches a cold
March was a pivotal month for the global economy as swelling coronavirus cases forced well over 100 countries to enforce either a full or partial lockdown, affecting billions of people. The extraordinary levels of uncertainty resulted in global shares suffering their worst fall since the 2008 financial crisis. In a fight against the global pandemic, the Federal Reserve cut interest rates to zero and launched a massive $700 billion quantitative easing program to shield the US economy. It did not end here. Trump later signed a historic $2.2 trillion emergency relief package into law.
It was all gloom and doom in April as the confirmed global coronavirus cases surpassed 1 million. The IMF’s gloomy warning around the global economy suffering its worst blow in almost a century added insult to injury. Central banks across the world joined the easing bandwagon in a desperate attempt to protect their economies against the negative impacts of COVID-19. In the commodities space, investors received a real shocker when Oil prices went sub-zero for the first time in history as the pandemic destroyed demand for transportation fuel. With storage capacity reaching its limit, sellers were paying buyers to take the commodity of their hands!
US oil prices turned negative for the first time in history in April amid the deepest fall in demand in 25 years
China was in the spotlight in May after imposing a draconian national security law on Hong Kong. The return of geopolitical tensions at a time where the world economy was dealing with COVID-19 blunted risk appetite. Adding to the woes was the fact the confirmed global coronavirus cases surpassed 5 million. However, some light was offered at the end of the tunnel thanks to hopes around a coronavirus vaccine.
The unprecedented fiscal and monetary policy support from governments and central banks fuelled expectations around a ‘V’ shape economic recovery in June. Such a recovery means that the economy bounces back quickly to its baseline before the crisis, with no hiccups along the way.
As vaccine hopes fuelled the risk-on rally, there was no love for the Dollar in July. Given its status as a prime destination of safety, the improving market mood made it an easy target for investors. Technology stocks were able to shine through the chaos in July, propelling the global equities higher. However, investors were later dragged back down to reality after US GDP contracted by 32.9% in Q2, it’s lowest economic growth since the government started keeping records in 1947.
Gold’s explosive momentum to all-time highs was akin to a speeding train reaching full velocity with the fundamentals keeping the engines running at maximum capacity
All that glittered was Gold in August as the precious metal made history by hitting an all-time high above $2075 an Ounce. Interestingly, news around Russia registering the first coronavirus vaccine improved market sentiment which in-turn punished the Dollar further. In the United Kingdom, data confirming that the economy nosedived into recession for the first time since the financial crisis compounded the Pounds woes. On a brighter note, Apple hit a market capitalization of $2 trillion.
The focus shifted towards the presidential race in September. Investors who were hoping for clarity on future policy were left empty-handed after the first presidential debate between Donald Trump and Democratic presidential nominee Joe Biden degenerated into a surreal shouting match. On the COVID-19 front, the number of confirmed cases across the globe surpassed 30 million.
October was pretty much defined by the US stimulus talks and whether there would be a breakthrough on a new fiscal stimulus bill before the election day.
Biden’s win changes the mood music for markets and eliminates an element of uncertainty
In November, the biggest highlight was Joe Biden’s victory in the presidential election. There was a collective sigh of relief across the world after the drug companies Pfizer and BioNTech announced that their coronavirus vaccine was 90% effective. Optimism around the vaccine bringing back normality sent the S&P 500 to all-time highs while the Dow Jones cleared 30,000 for the first time. It did not end here, Tesla’s market cap rallied above $500 billion for the first time.
Anyone expecting the final month of 2020 to be chilled ahead of Christmas and the new year were left disappointed. As the market mood improved on vaccine hopes, the Dollar tumbled to levels not seen in more than 2-1/2 years. The United Kingdom became the first country in the world to approve the Pfizer/BioNtech. In the States, Tesla joined the prestigious S&P 500 index on December 21st while after months of stalled negotiations, Congress finally passed a $900 billion COVID-19 relief bill. This was not the only breakthrough. After nine months of tense talks, the UK and EU were able to reach an agreement on a post-Brexit trade deal before the transition deadline on 31st December. The cherry on the cake was Bitcoin rallying to an all-time high above $28.5k.
There is no doubt that 2020 was a year defined by COVID-19, chaos, and uncertainty. However, 2021 may be seen as a year of hope and a return to normality as countries distribute vaccines. Will COVID-19 remain a major theme in 2021? How will Biden’s victory impact the US economy? Is this truly the end of Brexit? Will the new trading year offer as much volatility as 2020?
For now, these questions remain a mystery but 2021 could provide the answers.
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