2020 – A year like no other

2020 started much like any other year, with the clink of champagne flutes, the cheerful Auld Lang Syne and the flash of fireworks over the London skyline. What it would become however is nothing like most of us have experienced before.

After the drama of the past three and a half years, the UK officially left the EU at 11:00pm on 31 January. The event passed without a great deal of comment, with reports focused on seemingly draconian lockdown and quarantine procedures being implemented by Chinese authorities to contain a new Coronavirus, supposedly originating from Wuhan.

COVID-19 hits home

Over the next couple of months cases of COVID-19 infection would spread like wildfire through Europe, causing disruption to supply chains and lost working days across all major market workforces. Oil shares tumble, having a knock-on effect on national equity indices. Investors reacted by selling, in favour of the relative safety of the bond market and gold.

Stock market volatility / crash

As governments attempted to slow the spread of the virus through measures including the compulsory closure of retailers and other face-to-face businesses, the global stock market plummets, with falls exceeding those seen in both the 2008 financial crisis and 1987 crash, and worryingly reminiscent of the 1929 stock market crash which was then followed by the great depression. Investors experienced almost unprecedented volatility, with intra-day moves of up to 10% being a regular occurrence. The Dow Jones set a new record for a one-day fall, of almost 3,000 points.

Central support packages

By April, central banks were introducing massive support packages. This coupled with a flattening infection rate in most countries led to a flash of optimism market recovery. The notable exception to this was the US, where President Trump continued to express support for an early end to the lockdown, and citizens took to the street to protest the closure of their shops and businesses. Meanwhile, the US’s infection rate continued a solid upward trajectory.

National lockdown

After a month since Boris Johnson’s national address advising everyone to stop non-essential contact and unnecessary travel, now commonly referred to as ‘lockdown’, the UK economy and workforce looked forward to the opening of non-essential shops on 15 June. Hairdressers were inundated with those wishing to fix their ‘covid cuts’ and Rishi Sunak’s Eat Out To Help Out scheme brought some much needed custom back to struggling businesses. In an attempt to save UK jobs it was also the then new, but popular Chancellor who introduced us to furlough, which helped keep many jobs at a time when there could have been mass unemployment.

During this lockdown period there was a refreshed sense of national pride, caring for others and increased sustainability goals felt by most following the earlier madness where people were panic buying toilet roll and supermarkets had empty shelves. We discovered a new national hero in Captain Tom, clapped to show our support for the NHS, signed up in our tens of thousands to help those unable to collect their own prescriptions or supplies and intended to be more sustainable after footage of fish returning to the crystal clear Venetian canals. The financial services industry experienced more demand for ESG investments.

Even the likelihood of a staycation for many this year was not too bad whilst there were no plans to resume foreign travel and quarantine was introduced for travellers entering the UK.

Many businesses were forced to adapt to working at home where possible if they had not already, which did not come without its challenges for many; balancing child care, home schooling and pets under foot. A previously relatively unknown company Zoom became a household name with virtual quizzes taking place across the globe.

Keeping the property sector moving

Earlier in the year the housing market shuddered to a halt. Recognising this, the UK government quickly introduced a well-received stamp duty holiday with thousands taking advantage of this with property moves also exempt from lockdown. This with more adults working from home has led to a reversal of the last decades trend with more moving out of big cities in favour of de-urbanization.

The tech sector booms

These global lockdowns had produced a perfect environment for many of the tech giants, such as Facebook, Amazon, Apple, Netflix and Google to do extremely well, with Jeff Bezos becoming the richest man on earth. The demand for online deliveries soar and cash becomes almost defunct in favour of plastic. This technology sector rally predominately in the US broadened to other sectors.

Regional lockdowns

Through the easing of lockdown measures, governments gained an understanding of what to expect. In the UK, regional pockets of increased spreading were observed, resulting in Leicester being locked down for a further two weeks. Meanwhile, the data coming from those US states that have come out of lockdown showed a clear indication that a second wave of the pandemic was likely. With a permanent lockdown being unsustainable, Governments were beginning to prioritise the economy over public health, and it seems unlikely that a second wave would be met by total nationwide lockdowns. The response is expected to be more on a regional basis as required.

Lockdown 2.0

By October the UK and EU markets performed poorly, as COVID-19 case numbers began to increase rapidly, and lockdowns were introduced across several cities and regions, culminating in whole countries heading into lockdown 2.0 by the end of the month. This time would be different though, in an effort to balance the health risk with economic risk, schools were kept open and businesses urged to return to working from home where they can. This being the case, the new daily joggers disappeared as quickly as they had appeared in lockdown 1.0.

Brexit

The Internal Market Bill passed in October had potentially set back the chances of a free trade deal with the EU before the end of the year. This was exacerbated by a stronger dollar, which saw strong gains as the presidential election campaign got properly underway. US Equities had seemingly moved to discount a Democratic win in the November election, but repeated threats from President Trump to challenge any result that did not favour him, sent ripples around the markets, with fears that the election on 3 November, might not be fully resolved any time soon. The roll-over in technology shares continued as investors took profits from the parts of the market that have seen the biggest gains during the year. In fact, the election was decided within a few days, resulting in a sharp bounce in US equities on 9 November.

The outlook for the UK and EU economies was further dented by an apparent breakdown in talks between Boris Johnson and Angela Merkel who told UK representatives that a deal now seemed ‘overwhelmingly unlikely’, whilst the British delegation returned to London announcing that British businesses should now prepare for an exit on WTO terms.

Hope

On 9 November, Pfizer announced the creation of a successful COVID-19 vaccine. Although this was a slightly tricky vaccine to transport and deploy, requiring storage at -80c, markets around the world reacted with unbridled enthusiasm, and countries and stocks that had been the hardest hit, rose strongly on that day. This announcement was followed fairly quickly by two more, including the Moderna and Oxford vaccines, which do not require special handling, and can therefore be deployed more quickly and easily.

US Presidential election

After another tiresome wait for a US election result to be confirmed, Joe Biden emerged as the next president. At 78, when he enters the White House, he will be the oldest man ever to do so. With this, and the Democrats having failed to win the Senate, it is not clear that a second term for Biden can be assumed, but for the moment, the market was content to breathe a sigh of relief and look forward to more stable international relations, and a return to post-pandemic normality sometime in 2021.

Japan continues to power ahead

Japanese stocks continued to be among the best performers outside of Europe in November. The Japanese market continues to benefit from the appointment of the new prime minister, Yoshihide Suga, who is expected to roll out his own, improved version of Abenomics. Shares were also buoyed by the Democrat win in the US election, with hopes that an easing of the Sino-US trade dispute may now be more likely. This has led to an increasingly positive view of the Japanese market.

Kreston Reeves Financial Planning

We have been fortunate to benefit from investing in technology over a number of years to allow for remote working and virtual meetings, along with various processes and wellbeing initiatives to allow for a seamless transition and ‘business as normal’ whilst ensuring the health of staff and clients.

Despite its challenges we are also proud to have achieved several accolades in 2020, including our seventh consecutive year listing in New Model Adviser’s Top 100 IFA firms, continued Chartered Financial Planning firm status, PFS Associate firm status, individual professional exam successes and PR exposure in various publications.

Despite significant disruption to the global economy, our robust investment portfolios have been resilient and continued to deliver.

2021

The next year will likely continue to be challenging on all accounts, but there is general optimism with vaccine rollouts in the UK, New Zealand declaring itself virus free and the normal market Christmas rally.

The extension of furlough has allowed the UK to suffer less unemployment than some other countries but there will bated breath by many as it is largely unknown on how the various economic aid packages will be funded and whether Rishi Sunak will retain his popularity following this being unveiled.

Whilst working from home has been challenging for many it is likely that there will be an increased demand from workforces to adopt a more flexible or agile working pattern to allow for a better work life balance.

The Kreston Reeves Financial Planning team are dedicated to continue to adapt, innovate and grow in terms of size, service offering and delivery over the next year including our own team sustainability goals through our own actions and investor leadership.

I think it is fair to say the majority of us look forward to the end of 2020 to return to a greater sense of normality in 2021 where we can hopefully all resume contact with family and friends.

To discuss your plans for the future with a Financial Planner please contact our Financial Planning team on +44 (0)1227 768231 or provide your details on our online enquiry form.

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

Kreston Reeves Financial Planning Limited, Independent Financial Advisers. Authorised and regulated by the Financial Conduct Authority.