2020 will forever remain the year that the pandemic changed the way the world functioned and societies lived their lives. Travelling was reduced to a minimum or became non-existent, regional trade agreements replaced globalisation, and so on.
In hindsight, the year was terrible. Only by listing some of the events that happened this year, one can have a full picture of what the world has gone through and why everyone is keen for the new year to begin.
Besides the health crisis, 2020 already had a tough agenda for financial markets – the U.S. elections and Brexit were on the table. When the COVID-19 pandemic came, the conditions for the perfect storm were created.
Critical Events in 2020
Until March, financial markets focused on U.S.-Iran tensions as well as on the U.S.-China trade talks. Some images and rumours from China sent some shivers across the European health sector, and the rest of the western world, but the “Chinese virus” seemed a world away.
By March, the virus started to spread aggressively. What followed was a collapse in the international financial markets, with some industries and sectors shrinking dramatically, especially in hospitality-based companies.
Lockdowns started in Europe, with countries closing their economic activity one by one. By April, the stock market in the United States crashed, triggering circuit breakers so fast that voices called for the suspension of trading activity until the virus is under control.
By April, twenty-two million Americans filed for unemployment benefits. Governments and central banks rushed to give help either from a fiscal or monetary policy perspective. Nevertheless, businesses failed, especially small to medium-sized ones.
And then the oil prices went negative. For the first time in history, the futures contracts for delivery in May settled close to $-40. Effectively, with the world’s largest economies in lockdown mode, there was no storage space left in the world, and producers literally ‘paid’ anyone able to take the oil off their hands.
Such a move triggered deflation trends in advanced economies, making it even more difficult for central banks to react.
Slowly but surely, the world realised that it needs to move forward. Stocks rebounded, fueled by central banks’ support. The market capitalisation of the so-called “work-from-home” stocks increased dramatically. Companies like Amazon, Zoom, Google, or Facebook saw their shares reach new all-time highs.
By November, hope arrived – potential vaccines showed high efficacy against the spread of the virus. Another wave of ‘panic buying’ stocks followed.
All in all, 2020 offered many lessons. For sure, it will remain in history as one of the ugliest years ever. However, the lessons learned may be more valuable than they appear at first glance. Let us hope that the surprises delivered by 2020 encourage changes to our financial structure to avoid similar crises in the future.