New year, old challenges

The end of the year is always an opportunity to take stock of what happened in the year that is ending and align expectations for the one that is beginning. This is even more true for such an unusual year as 2020.

Perhaps the best way to grasp this year’s unusualness is to try to recall what we expected for 2020 when it began. This is actually hard to remember and it is also hard to believe that it took us so long to realize the dramatic human and economic burden that the pandemic would bring about. However, the shock and the size of the economic downturn caused by the pandemic will be hard to forget.

After a devastating first half of the year, when the pandemic led to the closure of business, a drastic reduction in mobility and large capital outflows, which had already begun in late 2019, the situation changed in the second half of the year. Most notably, there was strong GDP growth in the third quarter. The year looks set to end without recovering the level of activity seen at the end of 2019, but the reduction was less than feared in mid-2020.

In terms of future prospects, the year ended much better. Two important events in November – the U.S. elections and the success of COVID-19 trials – positively affected investors’ mood in the last few months of 2020. Thus, we ended the year with a strong increase in risk appetite, appreciation of assets in emerging countries and the weakening of the U.S. dollar against other currencies.

Enjoy the reading of the full report!