What happens next? Market recovery 2020/2021

16 April 2021

It has been over a year since the start of the pandemic took hold and the first of the now familiar lockdowns took effect. Panic was not an unfamiliar reaction, with the hoarding of toilet rolls, rice and pasta, to name a few. Many global markets also took fright and for most, the bottom of the market occurred on 23 March 2020 as indices largely reached their maximum falls.

In the autumn of 2020, we reflected on the return of the markets in our blogs, with many clients enquiring about fund values and being surprised that the anticipated plunge in values was not as severe as they first thought. Many global stock markets became undervalued by the falls (i.e., not a reflection of true values) and this has been reflected in the subsequent rises largely noted across the board.

As we would always maintain, past performance is not a guarantee of future performance, and fund values can fall as well as rise. However, in these notes, I wanted to look at the situation a full year on (plus a bit) to see where we were and where we are now. I have detailed some thoughts below which I hope are helpful and give an indication of progress.

With the outlook a lot brighter for global markets, confirmed recently by the IMF in their April 2021 outlook (more can be found at their website www.imf.org), we believe that markets are still slightly undervalued, although time will tell if this is true.

However, since the bottom of the market at about 23 March last year, we have seen the following examples, using a range of indices to potentially demonstrate an overall view (approximate):

Market Index

Value on 23 March 2020

Value on 09 April 2021

Percentage change

FTSE100 (UK)

4993

6915

38.5%

FTSE 250 (UK)

13078

22235

70%

Dow Jones (US)

19173

33503

74.7%

Gold ($/Oz)

$1567

$1744

11.3%

Brent Crude (Oil) $

$23.75

$62.95

165%

This is not a guide to future performance, but these are notable changes nonetheless. The last entry might be the one that you actually experience the most, when trying to fill up at the petrol pumps, especially now you can actually use your car! This might be reflected soon too in the inflation figures, which is a future concern to many economists at the current time.

There is no guarantee that the trajectories seen above will continue; indeed, some of the increases are very high and unlikely to be repeated in their magnitude, but they are positive none the less.

No individual advice is provided during the course of this blog. If you would like to know more about investing into pensions, ISA and investments overall, then please contact the team at Chapters Financial in Guildford.

Keith Churchouse FPFS

Director

CFP Chartered FCSI

Chartered Financial Planner

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