• Trustees Private Wealth

Feb 17, 2021

2020 Year in Review - Investment Markets

December is a time to take stock and look to the year ahead. Many like to make bold predictions, which while exciting, tend to be a distraction and are often times inaccurate. What’s more important is understanding how markets work and being invested appropriately for your goals.

2020 was chaotic

Leading into 2020, not many would have predicted a year like we’ve had. A global pandemic didn’t feature on anyone’s radar of risks in 2020. There were other events throughout this year, such as the Black Lives Matter movement, Australian Bushfires, a US President impeachment trial, a bear market, a stock market bull rally, a global recession, the UK left the EU, locust plagues in India and Africa, and a lot of earthquakes (1,746 above a 5 magnitude to date). However, these were all overshadowed by the continued spread of COVID-19 and the tragic health impacts that have occurred.

The short list above is not intended to frighten, but more to highlight the unpredictability of the world we live in. Despite all of this, the New Zealand market returned approximately 12% year to date which not many of us would have predicted back in March.

Taking stock

At its lowest point the New Zealand market was down -26%, with the average company down -36%. Fisher & Paykel Healthcare was the only positive company, up 22% at the end March, and Tourism Holdings was the worst hit, down -84%. Since then, the average New Zealand company has returned 16% year to date, with the biggest return from Pacific Edge, up over 750%. By all accounts it’s been a great year to be invested. A reminder that markets tend to bounce back, it’s typically just a matter of time.

Ignore the noise

Shares can be exciting and daily price movements can be large. It’s always tempting to use equities as a quick way to make money but in order to get this high return, shares come with substantial risks.

Stay the course

During March many investors were seen switching out of their growth oriented KiwiSaver funds into more conservative funds. For those investors, locking in the loss could have cost them as much as 15% of their portfolio value, while those who stayed put have been able to take full advantage of the stock market recovery.

Focus on what you can control, have a plan and stay the course.

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