Reflecting on Year 2020 and understanding how to invest better

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As far as this generation is concerned, it is fair to say that year 2020 is like no other we have seen or experienced. We started the year with the COVID-19 pandemic, followed by the escalation of the trade war between the USA and China, the downturn of the world’s economy, the USA Presidential Election and ended the year finally with good news that some vaccines for COVID-19 have been made available.

With so many events taking place, let us look back on some of the major ones and how they have impacted investing, and what we have learned from these experiences.

Major events that occurred in 2020

Needless to say, the first thing that comes into our minds is the global pandemic and you would agree that this pandemic has changed the lives of each and every one of us. COVID-19 spread with alarming speed, infecting millions worldwide and at one point, brought the world’s economy to a standstill with countries imposing lockdowns and restrictions. Markets were down, employment rates were high, and companies going bust seemed to be everyday news. Thankfully, governments worldwide came out with plans and policies to combat COVID-19 and gradually, we are seeing some improvement to the economy.

The second event is the on-going trade war between USA and China. The trade war started during the year 2018 with both countries imposing tariffs on imports. This continued until 15th January of 2020 when both countries signed “Phase 1” of the Economic and Trade Agreement. This is followed by reduction in tariffs, signalling initial compromises from both countries. However, things did not get better towards the end of this year as the USA vows to take a tough stance on unfair Chinese trade practices going into 2021.

Last but not least, who can forget the USA Presidential Election in November 2020 when President Trump lost to Mr Biden but refuses to concede defeat, even after the Electoral College had officially handed Mr. Biden the Presidency.

What are the impacts of these events for year 2020 and 2021?

Gold prices going up – whenever the global economy faces a crisis, gold prices will always benefit as traditionally, gold is considered a safe haven. In additional, lowering of interest rates by the Feds have also sent prices of gold soaring.

Will the gold price rally into 2021? We are seeing a correction now for gold prices but generally, most analysts believe that the rally will continue as the Feds will keep interest rate low during 2021. In additional, governments will continue to inject money into their economy during the recovery process, hence prompting gold prices to go further north.

It should not come as a surprise that the pandemic has sparked a renewed investment interest in the healthcare sector across the world. Take AbbVie for example, they started the year at a price of USD 89.55 per share and at the time of writing, USD 104.45. Closer to home, Top Glove was SGD 0.51 per share at the start of the year and currently trading at SGD 2.18 per share. Global health care companies are in the midst of developing a vaccine, which can dramatically reduce the number of infected cases. Depending on the speed and effectiveness of the development of vaccines, 2021 should be an interesting year for companies in the healthcare sector.

According to the WHO, there are currently three COVID-19 vaccines for which certain national regulatory authorities have authorized the use, although none of the three have received WHO official authorization. Another two vaccines are in the later stages of trials. In the year 2021, we should see a gradual transition back to pre-pandemic lifestyle, hence alleviating consumers’, and investors’ confidence. A post-recovery growth is forecasted in 2021 when more vaccines are made available as we return to normal.

What can investors learn from this pandemic?

  1. Embrace volatility – Seasoned investors should know that markets are subject to multiple cycles of volatility. They should take this opportunity to reflect on their investment portfolios and make changes accordingly. As for new investors, they should not be discouraged by the current situation since failure to embrace volatility might keep them away from participating in the growth potential of equities.
  2. Spend more time in the market – While we hope to effectively predict the trend of the market, we know it is impossible to do so 100% of the time. Instead of using our intuition and prediction, investors should focus on spending more time in the market. We do know that the market will eventually recover; we have survived global crisis in the past and will continue to do so hence, the more time you spend in the market, the better your chances will be.
  3. Adapt, adapt, and adapt – This pandemic has highlighted the vulnerability of even the strongest of blue chips. At the same time, it also shows many companies adapting to the situation and have bounced back. Investors should adapt as well and take positions / make decisions based on their financial goals.

Click here to find out more information on how you can invest better in the new year.

 

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