2020 - The year in review

Johan Gouws looks back on 2020 and the effects of the COVID pandemic on markets and investments as well as the economy. Lastly, what investment lessons we have learnt over the past year and what we can expect from 2021.

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When we started out in January there was much anticipation and expectations about what 2020 could hold for us from a business, personal and wealth creation perspective. Whatever expectations we had changed rapidly as the reality of the COVID pandemic, which had its origins far away from South Africa, set in during the months of February and March. It ultimately hit home when the Level 5 national lockdown was announced by the President during March and when our economy was effectively shut down and our freedom of movement became very restricted. Concerns about what the potential impact of the COVID pandemic could mean for the global economy and company earnings started rippling through investment markets towards the end of February. Panic set in and global equity markets experienced its most rapid and deepest sell off in decades.

Most of the world entered a recession during the third quarter of 2020 and governments and central banks around the world responded aggressively through fiscal and monetary stimulus measures. The aggressive fiscal and monetary response seemed to provide a cure for investment markets with both the global and local equity markets having recovered to levels last seen in February this year.

There is a saying that one must never waste a good crisis and best we could do is to reflect on the lessons that we have learnt. The first lesson is that one needs to keep your eyes on the horizon when the ship is rocking from side to side as that is where our investment destination lies. Having a well thought through and robust investment strategy protects investment values and lessons the risk of panic and irrational decision making in the short term. One has only lost money if you have sold your assets at a lower value than what you have bought them. If you stay invested the markets will recover and get you back on track to achieve your financial goals and objectives. Finally, the value of an advisor is critical as advisors are independent and objective partners and sounding boards that helps investors and retirement fund members to keep perspective, remain focused and calm and assist them in achieving their long term goals.

There is still much uncertainty for the global economic outlook as the second wave of the COVID pandemic is spreading across the US and most of Europe and as new lockdown measures are being implemented. While looking more promising every day, the timeline for the final approval of a vaccine and the logistics related to making and distributing the vaccine remains difficult to predict. At home slow but steady progress is being made around corruption, infrastructure development and strengthening institutions like SARS, the NPA and Eskom.

As we move into 2021 the COVID pandemic will still be with us, but with the benefit of hindsight we will know that we have weathered the storm and we will be wiser and more prepared for future storms given the lessons we have learnt.

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About the Author
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Johan Gouws

Head of Advice, Sasfin Wealth

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