2020 Market Year in Review

APMEX

12/28/2020 4:09:59 PM

2020 Market Year Review

This year started full of optimism, with financial analysts expecting another year of excellent growth worldwide. It didn’t quite turn out that way. 

The year in finances had several significant factors, but the most important was COVID-19. Though Brexit, U.S. economic stimulus talks, falling oil demand and high unemployment were all major news stories, many of the effects could be traced back to COVID-19 and the global response to the pandemic. 

COVID-19, Worldwide Lockdowns and Global Recession 

At the end of 2019, Chinese health authorities reported a new coronavirus strain in Wuhan, Hubei Province. This, in itself, did not cause a great deal of concern. Coronaviruses are common, and the family includes such well-known bugs as the common cold and flu as well as the swine flu and avian flu that had caused pandemics previously. 

This coronavirus strain 19, or “COVID-19,” as it came to be called, spread rapidly. Wuhan was a factory town in a manufacturing area, and when workers went home over Chinese New Year to visit family, the virus was already in full swing. China quickly instituted lockdowns. Factories shut down, causing shortages up and down the supply chain. Many companies had to find alternate supply lines or deal with an uncertain future. 

COVID-19 did not stay in China for long. It quickly hopped across the globe with international travelers, and by spring, countries around the world were dealing with outbreaks and lockdowns. This caused sickness and loss of life and drove the worldwide economy into a recession. It also drove unemployment and underemployment, though many firms resorted to furloughs or hour cuts rather than cutting back staff. 

The IMF predicts that the global economy will shrink 3 percent due to COVID-19-related economic impact. Though some think this may be a little pessimistic, it’s likely that the global economy will shrink. The last time this happened was in 2009, on the heels of the 2008 financial crisis. The U.S. economy has shrunk by 5.9%, while the eurozone has dropped by 7.5%. China grew slightly, but growth was still sluggish. Current projections from the World Bank indicate that this will be the fourth deepest recession since 1870 and the most severe since World War II. This is the first recession to be triggered by a pandemic. 

Flight to Economic Safety 

Lockdowns hammered the price of oil, and that market went into freefall. Brent crude lost almost 70% of its value before slowly creeping back up. Stocks slipped as people began to move into less risky assets. Gold and Silver have long been a haven for people who were worried about the security of their finances, and along with treasury bonds, they became a go-to. Even Berkshire Hathaway, which traditionally avoided Gold, took a stake in some miners this year in a move that shocked many investors. 

A global recession has taken place. Meanwhile, stimulus funds given out by governments have increased deficits and debts, driving inflation and causing investors to look for safer assets. At its lowest point, Gold was at $1,477.30 per ounce for its spot price. But by August, Gold had come close to the $2,100 mark, and though it’s dropped slightly, it has been an excellent year for the yellow Precious Metal. Silver did even better — it started the year around the $18 per ounce mark but peaked around $29 and has hovered around $25 per ounce for the last few months. Platinum is close to where it started the year, though, like other metals, it crashed in March before climbing. 

This has been an excellent year for Precious Metals investors, particularly those who bought the March dip. Gold has been the go-to asset this year for many investors who wanted to safeguard their savings and others who were looking at its price growth, and though it’s fallen off its peak, an investor who bought at the start of the year would still be up over $350 per ounce. 

COVID-19 is the main story of the year, and though there are other stories (Brexit, the U.S. presidential election and more), everything financial was affected by the virus. Here’s to 2020 being over and (hopefully) a better year ahead in 2021.