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MONTHLY UPDATE

December 2020

Welcome back and here’s to wishing you a healthy and successful 2021!

2020 once again provided us with an important repeat lesson of the 2008 Global Financial Crisis (GFC) – Central banks are very powerful. They can’t cure viruses and they can’t create jobs, but they can boost confidence and move markets.

Therefore, despite 2020 being one of the most volatile years for stock markets in decades, returns were strong – especially for U.S. and Asian markets. Staying invested (as opposed to attempting to time your way in and out of markets throughout the year) was the most sensible approach during this volatile period.

Looking ahead, whilst the COVID-19 pandemic is likely to ease in 2021 as rapid vaccine programmes are rolled out across the globe, the impact of unprecedented levels of monetary and fiscal stimulus; together with structural changes to how we live our lives are likely to remain with us for years to come.

Some of the more widely expected outcomes for 2021 include (1) a weaker U.S. Dollar caused by Federal Reserve monetary intervention, (2) emerging markets outperforming developed markets as growth is likely to be stronger and valuations more attractive in emerging markets; and (3) active management potentially outperforming passive index funds after a decade of underperformance. We are also likely to see a greater dispersion in returns across markets and asset classes, requiring investors to focus on fundamentals of individual companies and sectors for results. We elaborate on some of these themes in more detail in our Latest Insights.