Welcome back! This blog is part two of our 2020 financial recap. Earlier this week we discussed the state of the markets pre-pandemic and reflected on some of the big economic lows that COVID-19 brought.

In this edition I will be looking at some of the major financial highs of 2020 and how, despite the markets falling, there were many opportunities to be had.

2020 the year risky portfolios paid off

One unusual thing we noticed when looking at the highs and lows of 2020 is that some traditionally high-risk investments had fallen less than lower-risk investments. For example, global equities typically carry more risk than UK equities, but somehow, they had fallen less.

This was partly due to the incredible performance of big American tech companies whose share prices have boomed during the lockdown. We found that some of the more risky global funds, that had exposure to the US markets, only fell around 16–18%, whereas the safer UK funds, from peak to trough, had dropped about 30%!

So, in this strange market, our clients with the riskier portfolios actually became our best performers.

The highs of recovery

Then, the market started to recover and we started to see some real highs. One, in particular, put 9% of their fund into Tesla and made a 76.8% return last year which is incredible!

Even the UK market presented a high in its own unique way. When the markets fell back in April, most of the other major markets, such as America, Japan and China, recovered quickly. But the FTSE 100 was still facing a lot of uncertainty with Brexit and the price of oil bringing it down.

The UK market – the biggest high of 2020

This meant a real high in terms of how cheap the UK market was last year. During November, the UK market was up around 10%, which is the most it’s done since 1989! This was a great opportunity to have bought into the UK market, which was a big high for us at Applewood Independent.

Then, coming into 2021, the FTSE 100 has had the best start the history books have ever seen! Of course, this was brilliant, but the real high is knowing the UK still hasn’t yet recovered all of its losses – it means there are potentially a lot more gains to be made!

So, moving forward into 2021 I think the message would be to not worry too much about volatility. It can present new opportunities to buy low and sell high. The UK market last year has been a great example of that. 

I would say that when it comes to volatility, buying something cheap may well come to realise its value if it’s well invested, because the markets have always recovered in the past. 

Here’s to a prosperous 2021 (fingers crossed)!

I hope this was useful. Feel free to email me directly for any further information at alex@applewoodindependent.co.uk.

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of an investment can go down as well as up. Past performance is not a guide to future performance.