Wat waren de meest opmerkelijke, veelzeggende grafieken van 2020? We vroegen het aan Jeroen Blokland, het hoofd multi-assets van Robeco, die dagelijks op Twitter een compilatie maakt van de meest interessante thema’s en dito infographics van dat moment. Bij deze zijn Engelstalige compilatie: “From sudden stop to vaccine euphoria”.
The sudden stop
As the virus outbreak developed into a deadly pandemic in a matter of weeks, it forced governments around the world to impose harsh lockdown measures, including the closure of schools and workplaces. As a result, equities plummeted into bear market territory at the fastest pace on record. Between 19 February and 23 March, the S&P 500 shed 34%. Equity indices in other countries hit hard by the virus fared even worse, with Italy’s stock market collapsing 42% and Brazil’s Bovespa down 45%.
Oil writes history
After Europe, the Americas were also hit hard by the virus, causing a massive decline in economic activity. This culminated in one of the most bizarre things I‘ve ever seen on the markets: because of the total collapse in demand, the May crude oil future settled at minus USD 37.63 a barrel. There was simply nobody willing to take physical delive.
Doom and gloom
During the height of the lockdowns growth forecasts were rapidly being adjusted downwards, with some very dark estimates as a result. The next chart shows the number of quarters of GDP lost for countries around the globe. ‘UNPRECEDENTED’. After Q2, Italy had lost 93 quarters, or almost 8 years of growth.
Darkest before dawn
But, as we’ve seen many times before, it’s often darkest before dawn. Those who dared to buy US equities in April are up more 50% now. Global equities are up 35% in euro terms. So, while economic data kept surprising on the downside, providing many astonishing charts equities embarked on one of their biggest recoveries ever.
The reason? The biggest joint fiscal and monetary stimulus since World War II. It’s the combination of the two which has led to the recovery. All other macro events, including the US elections, were little more than a side show.
Beyond macro
While the recovery in equity markets was mostly driven by massive fiscal and monetary stimulus, limiting damage to the economy, other non-macro factors were also at play. The total collapse of bond yields meant that, on a relative basis, equities became the most attractively valued of the two since the 1940s.
Valuation issues?
Yet, with extremely strong fiscal and monetary forces at work, markets had no alternative than to go up. By October, investors were increasingly pointing to equity market valuations as an important near-term risk. But without considering the fact that other asset classes were even more extremely valued and the incredible amount of liquidity that has been pumped into the financial system.
Based on the relationship between US excess liquidity and the PE ratio of the S&P 500, equities should trade at much higher multiples.
Vaccine euphoria, making 2020 a good year for markets
This brings us to December, with the S&P 500 up more than 14% year to date and the Nasdaq up an unbelievable 42%. Gold is up 23%, despite price pressure in recent weeks. Long-maturity bonds are also having another strong year, with double-digit returns. Paradoxical as it may sound, 2020 has been a pretty great year for markets.
Bitcoin here to stay
The list of positive 2020 returns includes bitcoin, which smashed through its previous all-time high of 2017 to reach heady heights of USD 28,000. Bitcoin has been the best-performing ‘asset class’ in eight of the last ten years.
Interestingly, this time it was institutional interest that caused another breathtaking rally as the cryptocurrency lost its schizophrenic nature and ‘became’ a form of digital gold. Bitcoin’s place in ‘the year in tweeted charts’ is well deserved.
