Tumultuous 2020 rewards investors who stared down Covid-induced turmoil

The bell has just tolled on one of the wildest years in Wall Street history, full of precipitous plunges, improbable rebounds and human tragedy.

The S&P 500 ended on an up beat, with a 1.4 per cent gain in the holiday-shortened week. This pushed its CY20 gain to 16 per cent, an ending that would have seemed far-fetched in March.

Investors needed nerves of steel to stay the course, and those who did were duly rewarded. Stocks jumped to all-time highs. Corporate bond yields hit record lows. Speculative mania sprang up everywhere from Bitcoin to IPOs.

Anyone who invested $10,000 at the start of 2020 can likely point to a portfolio that looks positively bloated at year-end. An investor plunging into bets that looked speculative in January would have done even better. A once little-known biotech company, an electric carmaker trading at lofty multiples, and a loss-making producer of faddish exercise bikes are all up more than 400 per cent.

The upshot: Most major asset classes have now posted a tidy profit thanks to the easiest financial conditions on record.

For the legions of newbie traders entering the markets after much of the world locked down, the “stocks only go up” mantra served them well — whether they crowded into stay-at-home trades dominated by tech firms or piled into the reopening trade at the market’s bottom.

Here’s a look at how a hypothetical investor would have fared putting $10,000 at the start of 2020 in a selection of stand-out assets:

Virus victors

The outbreak brought a boom for global healthcare-related stocks, including Malaysian glove manufacturers and biotech firms. One of the best pandemic plays of all was Moderna, netting a more than 400 per cent total return during the course of the year after regulators approved its Covid inoculation. Despite being first to market, Pfizer shares hardly budged.

Stay-at-home trades

As economies got shuttered, firms reaped gains if they enabled white-collar workers to carry on with business-as-usual, or something close to it. Zoom Video Communications was one such standout, quickly becoming a staple of homeschooling, office politics, weddings and bar mitzvahs.

The company is down from dizzying highs but still handed investors a total return of almost 400 per cent in 2020. Assuming they bought the correct stock.

Silver sparkles

Unprecedented amounts of stimulus from central banks fuelled currency debasement fears in some parts of the investing community. Those seeking to protect their wealth as the dollar fell to a two-year low flocked to precious metals. Silver rose more than 40 per cent during the year — eclipsing the likes of gold and palladium. Goldman Sachs advised investors buy the metal to capture surging demand for solar energy installations.

Electric dreams

The playbook wasn’t just about the pandemic winners and losers. Bets on clean energy outperformed as countries like China, Korea, and Japan, and even oil majors such as BP pledged to reduce carbon emissions while investors wagered the Biden administration would set the US on a similar course.

Electric carmaker NIO was the year’s best-performing stock, up over 1,100 per cent in total return terms, beating Tesla to the trophy.

Best performing country

Nigerian stocks, meanwhile, had an amazing year, as Airtel Africa, Dangote Cement and MTN Nigeria Communications generated huge gains. Local investors flocked to the market in search of returns as yields on government debt dropped.

FUD for thought

While speculative mania was everywhere in the second half of the year from developing-country stocks to clean energy, crypto grabbed much of the attention.

Digital currencies in 2020 took steps toward mainstream adoption and a boom in decentralised finance rekindled interest among developers. Bitcoin topped $29,000 for the first time on December 30.

Some investors worried that loose monetary policy will debase fiat currencies, while Elon Musk pondered whether it was possible to convert some of Tesla’s balance sheet into Bitcoin.