The effects of 2020 on the stock market and its recovery

13 November 2020

How likely is it, really, that the stock market recovers from ‘the 2020 effect’?

Investing in the stock market is investing in the future, and the only certainty we have about the future right now is that it’s uncertain. Between Covid-19, economic recession, social instability in the US and climate change, it’s enough to make anyone nervous about the future!

But markets always weigh the chance of rain against the chance of sun, and there’s a lot of things that could go well and lead to the stock market continuing to rise:

  • A reduction in the rate of Covid-19 infections due to social distancing measures, and the development and distribution of a vaccine
  • Economic recovery as New Zealand’s border is reopened
  • Reduction in tensions in the US if politicians address social justice issues
  • Lower carbon emissions if new technology makes fossil fuels obsolete.

 

Has 2020 had any positive effects on the market?

While you may have been busy focusing on those uncertainties or working your way through the 12-month supply of toilet paper you purchased to make it through lockdown, you’ll be pleased to know there is a silver lining!
What’s had the biggest effect on share investments at Booster this year has not been the attention-grabbing headlines, but the ways in which companies have adjusted to changes in consumer demand.

Here are a few of the benefits of these changing demands:

  • Apple earned record quarterly revenue as consumers flocked to purchase iPhones, iPads and MacBooks to stay connected during lockdowns.
  • Amazon.com benefitted from an increase in the number of purchases made online and are now set to earn over USD 300 billion of revenue in 2020.
  • NZ-based Fisher & Paykel Healthcare has had strong demand for its respiratory ventilation products that help treat patients with Covid-19.

The overall effect has been that the value of Booster’s investments has risen over the course of the year.

 

The steady march of progress

From wars to recessions to pandemics, markets have looked down the barrel of a lot of crises over the last century.

Graph showing the value of $1 invested in the US stock market in 1900 today and how it changes over time

As this graph shows, the overwhelming influence over this time has not been the negative effects of each of these events, but the steady march of human progress. In more simple terms, $1 invested in 1900 would have turned into over $70,000 today!

Booster’s diversified portfolios are positioned to benefit from this long-term trend by investing in a range of innovative companies across the world. These investments are combined with ‘defensive’ (more stable) assets such as bonds, which tend to rise in value when share markets fall and help take the edge off when share markets inevitably dip.

It’s all to help ease the path to achieving your financial goals, so that you can relax while your portfolio grows and progress marches on.

Check out Booster’s investment options and recent performance.