2020 has been the strangest of years. If you were living in the past and were able to travel forward to any year, 2020 would be a poor choice by many measures! That said, we usually compare to better times, tending to see the past through rose-coloured lenses and forgetting the challenges we faced along the way.
Earlier in the year, there was fear and uncertainty in financial markets, with almost every asset class recording a period of negativity. Share markets lost around 37% and bond markets were also volatile as institutions around the world strained under the weight of possibility of a pandemic-driven dystopia. For many, it was the first time they had ever experienced such a significant fall, let alone in the short time frame in which it was delivered.
However, in very 2020 style, capital markets have rallied, with share prices of many companies improving significantly since mid-March. The rebound has almost made a mockery of the emotions experienced earlier in the year. As is almost always the case, those who remained invested have been rewarded.
Yet as we ponder the oddities of this year, we are conscious of the vast change in economic landscape from just twelve short (yet long) months ago, which has largely gone unnoticed. That is particularly true in Western Australia. Some businesses have ceased to exist, others are thriving. Many are being kept afloat through an unprecedented level of government stimulus, which will come to an end in the new year.
The impact of government stimulus ceasing in the new year is definitely a concern, as is the ongoing rate of COVID-19 infections in the northern hemisphere. What 2021 will bring is anyone’s guess and if nothing else, 2020 has once again shown us that making such predictions can be a total waste of energy. We simply don’t know what the future holds.
It is with that in mind that we renew our focus on evidence as a guide for decisions about the future. In our view, having an investment philosophy that combines evidence and patience, allowing markets to deliver results over the longer-term, is more relevant than ever.
As we approach Christmas, it looks like those of us in Australia will be able to spend the festive season with family and friends, as lockdowns are relaxed along with travel restrictions. That’s not the case for others in the world and we feel for those of you who, like us, have families elsewhere who you will not be able to see this festive season.
Although it has been an unusual year, we are approaching its end with a sense of gratitude and optimism. The vast majority of our clients have managed to come through this crisis in good, if not great condition. The vast majority of our clients, friends and family are safe and well, even those who remain in parts of the world where the situation is not so positive.
This year will draw to an end like all others before it, and the new one will give us the opportunity to simply begin again. We therefore wish you all a Merry Christmas and hope you and your families stay safe and well to see out this strangest of years.