December 2020 saw global stock markets continue their upward trajectory, following on from a very strong November. This was despite Covid-19 infection rates rising significantly in the UK, Europe, and the US, and amplified by concern surrounding several new variants that appear to spread more rapidly. This required tighter lockdown restrictions which can be expected to dampen economic activity at the end of the year. Primarily, markets took comfort from the continued evidence that Central Banks and Governments are willing to provide support until vaccines can be comprehensively rolled out. For instance, the US Congress reached an agreement on a new stimulus package, and the UK extended its business support and furlough schemes. It is worth noting that, even at this early stage, the pace of vaccine roll-out remains highly differentiated across countries which makes for a disjointed recovery ahead.
Markets also breathed a sigh of relief that after four and a half years, although it may feel even longer, an agreement was reached between the United Kingdom and European Union. This supported UK assets and provided a boost to investor sentiment regardless of political stripes. https://www.wealthify.com/blog/brexit-deal-2020
Data released in December showed that the manufacturing sector has weathered the recent lockdown restrictions comparatively well, while the service sector has again borne the brunt of lockdown restrictions where reintroduced1. This is reflected in the fact the US service sector continues to expand strongly with lighter measures in place compared to Europe where services contracted albeit at a lower rate than in November.
Progress on a vaccine and the early roll out stages have lifted consumer sentiment which had been understandably low. But this move has been dampened somewhat by the recent rise in cases and the return to tighter lockdown conditions. The underlying trend of improving retail sales across the UK, US, and Europe persisted as consumers continue to spend their Covid-19 savings, although the crucial Christmas period data will not be released until later in January.
The beginning of the vaccine roll-out meant all markets rose. The markets that rose particularly strongly in November saw less of an increase in December. The regional breakdown saw Emerging Markets (7.15%), Asia Pacific excluding Japan (+6.48%) leading the pack followed by Japan (3.82%), the US (3.72%), FTSE-100 (3.10%) and Europe (2.48%).
The sentiment’s improvement around Sterling was driven primarily by progress in Brexit negotiations, although increased risk appetite also weighed on the US dollar and Japanese Yen. This saw the Sterling rise against the US dollar (+2.54%), Japanese Yen (+1.54%) and Euro (+0.18%).
Investment type performance breakdown
The lessening in political uncertainty, notably due to the Brexit deal, and the optimism surrounding the successful roll-out of Covid vaccines meant that December saw all asset classes gain, with shares (+2.37%) rising the most, with Property (+0.25%) and Bonds (+0.21%) ticking higher.
Summary with Plan details
The continued stock market gains mean Wealthify Plans’ performance was positive in December, with Plans holding more shares (such as our ‘Adventurous portfolios) rising more than those with a higher bond allocation (such as our ‘Cautious’ portfolios)*. Our Investment Team continue to actively monitor the financial markets and their impact on your Plan. And as always, we are ready to act in your best interests to events as they unfold. For more detail on our 2020 performance please see our blog.
1: Data from Bloomberg
*Past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.