The year 2020 has been a year of anomalies.
From the outbreak of a global health pandemic for the first time in 100 years, to the collapse in crude oil price to its lowest level in over 2 decades. The list of anomalies is incomplete without the worst global economic recession since the Great Depression, and the monumental refusal of a US President to accept a loss in the aftermath of a peaceful and fair Presidential election process.
It’s for these reasons that analysts have found predicting the constant turn of events around the world in 2020 more difficult than rocket science.
The biggest anomaly of the year for fundamental investors however is the “irrational resurgence” of global stock markets after it briefly nosedived earlier in the year in the wake of the exponential jump number of coronavirus infections around the world combined with the sudden start of an unexpected oil price war between Saudi Arabia and Russia.
Since Q1, the global economy has shrunk significantly but stocks which initially mirrored the global economic performance have fully rebounded and are setting daily records in several countries. The MSCI World Index which collapsed by around 32 percent in the space of just one month between February 20 and March 20 has now rallied by almost 61 percent between March 20 and December 23, making it one of the fastest markets rebound in economic history.
While it has largely been a bad year for almost everyone, the year has been absolutely brilliant for index hugging investors around world as stocks have surged almost randomly and without strong fundamental reasons despite the great economic headwinds. Investors crazy enough to have remained invested during the market crash in the month of March and those insane enough to buy stocks when it appeared in Q1 like everything was crashing to the floor have been rewarded immensely by Mr. Market.
So many investors have earned millions and billions of Naira as the stock market appears to be unaffected by the economic turmoil negatively impacting the fundamentals of companies whose stocks keep trading higher in the stock market everyday.
Leading the resurgence in global stock markets is Nigeria’s stock market which has outperformed every single market around the world (well everyone except Venezuela’s Caracas General Index which is up 1,262 percent Year to date due to the country’s dangerous hyperinflation problem). Out of 80 other stock market indices on Bloomberg tracking global stocks in different countries around the world, Nigerian Stock Exchange All Share Index (NSE Index) is the best performing market with a year-to-date return of around 44.55 percent.
Behind the NSE Index, are the NASDAQ and KOSDAQ Index which have returned 42.7 percent and 38.64 percent respectively to investors so far this year. The NASDAQ Composite Index is a US Index that tracks all stocks listed on the NASDAQ Stock market which is mostly US technology companies while the KOSDAQ Index tracks the performance of companies listed on the South Korean KOSDAQ stock markets.
Other high-flying stock market indices in 2020 with returns above 20 percent year to date include South Korea’s KOSPI Index (+27.72%), Denmark’s OMX Copenhagen 20 Index (+27.19%), Turkey’s Istanbul 100 (+25.37%), China’s CSI Index (+23.08%) and America’s RUSSELL 2000 Index (+20.11%) according to Bloomberg.
However, Latin America and European markets are still feeling the shocks of the coronavirus outbreak and economic slowdown. These 2 continental markets are yet to see their markets recover in similar manner as the other continents in the world. In Latin America, Columbia’s COLCAP Index (-14.45%), Chile’s Santiago Select Index (-11.49%), Mexico’s MEX IPC Index (-0.39%), Brazil’s BOVESPA (+1.9%) have all lagged the MSCI World Index which has returned 13 percent YTD.
Several European markets such as Greece FTSE/Athen’s 20 Index (-18.01%), Spain’s Madrid General Index (-14.93%), Austria’s ATX Prime (-13.6%), (-UK’s FTSE All Share Index (-12%), Russian Cash Index (-10.7%), Poland’s Warsaw Top 20 Index (-9.03%), Portugal’s PSI 20 Index (-6.89%), France’s CAC 40 (7.63%) and Italy’s FTSE MIIB Index (-5.85%) have all underperformed Europe’s Euro’s Stoxx 50 Index which returned -5.39 percent YTD.
It has definitely been a mixed year for investors all over the world as many have earned a fortune in the stock market while others lost theirs. But fortunately, 2020 has been a splendid year for Nigerian investors who can finally put an end to 2 consecutive years of stock market declines that hurt local investors in 2018 and 2019.
