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December 2020 economic update

Bitcoin had an eye-watering 300% increase for the year.
  • The biggest news by far is that the UK and the EU have agreed on a post-Brexit trade deal. As expected, negotiations came right down to the wire, with an agreement being reached on Christmas eve. While this brought some strength to the pound, it could not save the UK stock market from having its worst year since the Global Financial crisis in 2008, down over 14% for the year.
  • Over in America, the election saga drags on with a very desperate Donald Trump still trying to disrupt a cohesive handover to the new administration as best he can, without interrupting his golf game of course! Through all of this, the US markets enjoyed another strong month, ending the tumultuous year up just over 15%. If a 29% difference between the UK and US markets does not demonstrate the need for a globally diversified portfolio, we don’t know what does!
  • Our local stock market had a strong month. The fact that our All-Share Index managed to eke out a positive return of just over 4% for the year, may come as a surprise to many. We still face many challenges in 2021.
  • It is clear that markets – that look forward and try to price in what they think will happen in the future – are confident that the news of Covid-19 vaccines starting to roll-out globally, will be the catalyst for a return to strong growth. We have to be careful not to get too excited, though. Pre-Covid, towards the end of 2019 many analysts felt that developed markets have run extremely hard for several years and that it was only a matter of time before the house of cards came down. This is not necessarily the case for emerging markets, giving them a strong outlook in the medium to long term, provided they can somehow navigate their way through the immediate fallout brought on by the pandemic.
  • All things considered, we are optimistic that 2021 will yield many good investment opportunities for fund managers who are able to pick and choose from global stocks and other asset classes, even if we expect another bumpy year. Investor discipline will be more important than ever.
  • What would a 2020 roundup be without a mention of its best performer by far – Bitcoin! Bitcoin started 2020 on $7 172,80 and gradually grew (mostly unnoticed) up until mid-October after which it gained serious momentum. The cryptocurrency ended the year on $28 962.80, an eye-watering 300% increase for the year. Whether you are a fan or not, that is a number that can’t be ignored. We truly hope that the current rally was driven to these levels by experienced/institutional investors who actually understand the functional applications of Bitcoin so that we won’t see it all end in tears for the average investor again as it did during 2018.
  • The rand continued to strengthen for most of the month, reaching a low of R14,54 against the dollar on December 18, after which it depreciated ever so slightly into the year-end. By December 31 it was sitting around R14.68, 2,4% against the dollar for the year.
  • One-month index movements:
    • JSE All Share Index: 4.2%
    • S&P 500 (US): 4.1%
    • FTSE (UK): 3.1%

ADVISOR PROFILE

Michael Haldane

Global & Local Investment Advisors

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