Finance Explained

With lockdown still in place in many countries around the world, it may be hard to look to the future and feel optimistic about the prospects for the global economy. However, data from the World Bank (January 2021) states that the global economy is expected to grow by 4% in 2021. This forecast comes with the assumption that the Covid-19 vaccine rollout is as expected. It is worth reviewing this data alongside the decrease in the global economy in 2020 which showed a contraction of 4.3% (World Bank, January 2021). This means that the overall size of the global economy would remain slightly under its previous levels, albeit on a more positive trajectory.  The World Bank take the view that the contraction in the global economy was 'slightly less severe than previously projected' which was down to advanced economies been less badly hit than expected along with a 'more robust' recovery in China.  They do offer the caveat that should the vaccine rollout be delayed then they o...

2020 saw many records in the investment markets and the 10-year US Treasury yields were no exception as they saw record lows. If we look at the data over the last year in the chart below (source: CNBC), then the impact of Coronavirus from February 2020 is clear. A sharp dip into March 2020 and then a slow, steady recovery from August 2020, but not the same recovery to previous levels and beyond that we have seen in many of the stock markets.  Indeed, if we look at the longer term trends going all the way back to the 1980s, then 2020 saw record lows as per the chart below (source: CNBC). The chart also illustrates the longer term trend with a steady decline in the yields over the past forty years (the thought of a peak 15% yield back in the early 80s, where could you find that kind of yield these days!). Looking at the longer term trends you may believe that the yields cannot get much lower and then a continued steady recovery is the likely way forward.  But, as ever, in the cu...

There is no doubt that 2020 was a tumultuous year for investing as panic set into the markets and volatility continued for the rest of the year and into 2021.  But how does it compare with other great crashes from history? There is good or bad news when looking at the S&P 500, depending on your view of the market. Looking at the trends, the falls were some of the sharpest in history, but the recovery has been the quickest when compared to the most famous crashes in the market.  Specifically looking at the initial crash lows across the first 180 trading sessions:  Great Depression of 1929: the worst with a 40-45% drop Black Monday 1987: a 30-35% drop Dot-com crash 1999: a 10-15% drop Great Recession 2007: a 15-20% drop Coronavirus 2020: a 30-35% crash, but the fastest and sharpest drop of all So, taken in context the 2020 shock was the fastest and most dramatic, even if the Great Recession saw more gloom over the 180 trading sessions. In terms of the recovery, 2020 was...

What a year 2020 was for investing.  Record-breaking lows, recoveries, logic, panic and confusion all thrown together with fortunes made and lost. A pandemic, Brexit and a sometimes chaotic US Election made for a perfect storm in instability. But now the dust is settling which sectors fared best and worst and more importantly why?  Let's look at the UK in this article. Data from IG  from H1 2021 (Jan-July) shows the disparity between sectors in the FTSE All-Share: Sector                                    Average share price return Healthcare                          +5.1% Materials                                    -1.8% Information technology      -2.1% Utilities ...

What should your investment strategy be going into 2021? It's been an incredible year for investing with record daily falls as well as rises, a pandemic, a US Election and of course Brexit still yet to be resolved with the end of year deadline looming and as yet no deal. If ever there was a year for hindsight this was it. The opportunities were endless both to short the falls and ride the highs, but it was a brave investor that sought them, let alone timing them right.  However, some clear trends were in play. As the pandemic spread, the fear-based pricing built into markets was always likely to lead to a readjustment and in the same way when word of a potential vaccine grew a sharp rebound was probable. As ever, fortunes were made and lost. Going forward is, as ever, tricky. The long term effects on economies and particularly unemployment will remain in place in 2021, even if we get the record bounce that many are predicting as the world slowly gets back to normal.  But what ...

It is a tricky time for investors at the moment to say the least. After one of the longest bull markets in history, the pandemic crisis caused huge disruption with sweeping share movements affecting individual stocks and sectors alike. There were some significant losers, including a swathe of high street closures, but also some dramatic gainers as the impact of Covic shook all parts of the marketplace and workforce. The biggest risers In terms of the biggest risers, let's look at the data from the FTSE-All Share from January to March 2020 as the first lockdown kicked in. Suppliers of the basic commodities and services fared best in the markets as society slipped down Maslow's Hierarchy of Needs towards the essentials. The world retreated inwards and once the supply chain could be secured the market reacted accordingly. Top of the sectors according to the IFS (Institute for Fiscal Studies) were the Food & Drink retailers, followed by Personal Goods, Medicines, Gas & Wate...