Global Markets – 4th Quarter December 2020

Geo-political and economic developments over 2020 have been unprecedented in terms of their scale and magnitude. No one could have foreseen or predicted the course of events that unfolded, with growth in almost the entire global economy being brought to a sudden halt as many countries went into total Covid-19 avoiding lockdown measures. While markets have recovered considerably since their March lows, continued elevated levels of volatility are likely to persist. The fourth quarter of 2020 saw a substantial up-tick in investor sentiment and increased risk appetite which put the US dollar under significant pressure. This relative dollar weakness is so far persisting. 

Developed markets gained over the quarter in dollar terms, with November’s performance notably strong due to the vaccine news. Overall, Joe Biden’s win in the US presidential election, the $900 billion stimulus package, and successful vaccine developments, drove US equity markets up considerably further boosting MSCI Developed World Index returns to some 14%. 

Global central banks remain firm in their support of the economic recovery. The US Federal Reserve stated that it will continue with current levels of quantitative easing and keep interest rates low. The European Central bank provided a similar message as they approved the landmark €1.8 trillion budget package which included a €750 recovery fund. Developed markets lost some momentum in December due to a resurgence of new Covid-19 cases which resulted in renewed lockdown measures.