World news – CA – A (market) magazine of the plague year

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Last December, the World Health Organization was notified of the first infection with the new coronavirus. Twelve months later, global financial markets were on a roller coaster ride like no other.

The virus wasn’t the first thing to scare markets this year. The tone was set when an oil market turf war escalated between Saudi Arabia and Russia on Aug.. January led to an oil price drop of over 5%.

Just days later, even though China’s stock markets began to fall when a group of more than 50 cases of pneumonia in Wuhan city triggered a WHO warning, there could be a new SARS-like virus.

Oil continued to decline as traders began to worry about a drop in Chinese demand. However, other key markets were not seriously affected until mid-February when it became clear that the virus was rapidly spreading from Asia.

Cue slaughter. From 20. February to 24. On March 23rd, when Europe’s major economies collapsed, MSCI’s 49-country world stock index lost more than a third of its value, adding up to a staggering $ 18 trillion.

Wall Street’s S&P 500, Dow Jones and Nasdaq fell 35%, 38% and respectively. 30% a. The internationally exposed FTSE and DAX markets in London and Frankfurt fell by 35% and 40%, the Japanese Nikkei by 30% and Chinese stocks by a modest 16%.

« Looking back, I felt like one of the villagers of the boy who cried the wolf story, » said Ben Inker, director of asset allocation at investment firm GMO.

« We had seen a number of potential pandemics never really develop. . . We assumed this would be contained, and when it wasn’t understood why the world was freaking out. ”

For reference, Wall Street’s record quarterly decline in 1932 amid the Great Depression was 40%. The fact that S&P and Dow hit record highs in mid-February made the crash seem more brutal this time around.

Governments were already trying to prop up their economies, but just like the financial crisis a decade ago, it took strong central bank medicine to stabilize markets.

The Federal Reserve’s move to cut U. S.. . Interest rates to zero in mid-March initially had no effect, but when new swap lines were opened to keep money markets level with the dollar and the ECB and other major central banks arrived with their own measures, the path eased.

BofA calculates that the central banks have spent $ 1. 3 billion an hour of asset purchases since March and 190 rate cuts this year, affecting four every four trading days.

JPMorgan estimates that central bank movements not only fuel the monster market rebound, but have left nearly $ 35 trillion, or 83% of all richer national debt in developed countries, with a « negative return » when inflation is considered.

This means that investors are effectively paying for the privilege of lending to these countries. The German Ministry of Finance, for example, claims to have earned more than 7 billion euros. 51 billion. ) from issuing new bonds this year.

By April, the International Monetary Fund forecast a decline in global growth to -3 percent, a 6. Downgrade by 3 percentage points from January estimate. The latest forecast is for -4. 4% for the year. « This makes the Great Lockdown the worst recession since the Great Depression and far worse than the global financial crisis, » it said.

Unemployment and global debt have also risen, and the World Bank warns that global extreme poverty will rise for the first time in over 20 years.

It could bring an additional 88 to 115 million people under the limit this year, and as many as 150 million by the end of next year.

Equity markets began to rebound in April, but the shocks didn’t stop. Oil went negative for the first time, dropping to minus $ 40 a barrel as oil producers feared storage capacity could run out.

It didn’t take long, however. It was back close to $ 20 a barrel by the end of April and now back over $ 50 – a 220% gain for anyone brave enough to dive in – though it’s still down nearly 25% for the year as a whole.

A breakdown of the best and worst performing stocks also tells the story of the pandemic, which has now claimed over 1. 6 million lives.

The Malaysian rubber glove maker Supermax and the Korean pharmaceutical company Shin Poong have around 1. 000% or. 2. 000% skyrocketed.

The boom in working from home and in video chat has increased Zoom by 490%. . Moderna, one of the drug companies that supply a vaccine, is up over 635%. Stocks on the sofa like Netflix and Amazon are up 64% and. 75% up while the other big trend of the year – electric cars – Tesla was up 683% and rival Nio was up nearly 1. 000%.

On the other end, cruise line Carnival is down 57%, beating numerous airlines, travel agents and retailers, while engine maker Rolls Royce is beating nearly 50% over the year.

There has also been a bob of the major currencies. The safe haven dollar rose until mid-March but has now fallen 6. 66% for the year and 5% since late September, while the euro and yen are up around 10% and 5%, respectively. .

Sweden’s krona is the best performance of 2020 with a jump of 13%. A 6. The 6% rise in the Chinese yuan will also be one of the best of the year, although emerging markets are still in great pain.

Brazil’s real has fallen 20%. Russia’s ruble – one of the top performers of last year – is down 15% despite a boom and a near bulletproof balance sheet. The Turkish lira has hit record lows but is still down 22%, while the Mexican peso and South African rand are both down 4. 4%, although they increased by 14% and. 20% decreased.

November was also key. First came the U. . S.. . Election defeat for Donald Trump, which raised hopes that some of global trade tensions would ease. Then, days later, the long-awaited news that one of the top vaccine hopes had been shown to be over 90% effective in protecting people from COVID-19.

This double boost brought a record of 12. 6% monthly jump in the MSCI World Stocks Index by approx. 6 USD. 7 trillion – or $ 155 million a minute – the value of world stocks.

It still works. Inventories have increased by over 13% for 2020. S.. . and German government bonds and corporate debt have all returned between 10% and 13%. 5%, gold is up 25% while the oversized FAANG Tech stock group is up 100%.

« The 2020 stock rally from lows is now greater than 1929, 1938, 1974; High prices collide with the positioning, which borders on greedy upward trend « , wrote BofA analysts in a note entitled » Frankenbull « .

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Stock exchange, Coronavirus, S&P 500 Index