In the history of stock markets, it is the crashes that stick in the mind most.
1929, of course, was the big one, which led to the great depression while the Tulip bulb mania of 1637 was the godfather of all inexplicable investment crazes that led to an entirely explicable collapse.
In 1973, the oil crisis caused the FT 30-share index to plummet and the oil crisis was followed in early 1974 by the three-day; some of us who lived through the three-day week thought we would not live to see such draconian restrictions put on daily life in Britain again in our lifetimes. How wrong we were – but more of that later.
Black Monday in 1987 was another biggie, caused by programmed (or algorithmic trading); has it really been around that long? Take that, millennials! We boomers were there first with our ability to have computers things immeasurably worse in the blink of an eye.
Talking of which, there was the bursting of the dot-com bubble in 2000 but that was restricted to a specific sector. Far more worrying and widespread was the financial crisis of 2007 and 2008 – the credit crunch – when it looked like the world’s banking system would collapse.
2020 had all the ingredients for a major market correction
You’d have thought that 2020, the year in which a deadly pandemic had the world and his wife changing into their brown trousers and adopting Jesse James-style face-wear, would be another year to add to the list of stock market crashes but while it is true that the FTSE 100 has lost around 15% of its value this year, that’s less than was lost on a single day on Black Monday in 1987 (and it might have been worse that day if more traders had been prevented from getting into work because of the aftermath of the hurricane that hit Britain).
What’s more, in the US, stock market indices have been hitting new highs this year after taking steep falls in late March.
In retrospect, it should have been obvious that there were going to be some winners from the pandemic as well as some heavy losers but as they say … hindsight is 2020!
So, here (finally) are some of those big-name winners and losers from the FTSE 100 in this most extraordinary of years.
Top of the tree is an investment trust. Yes, an investment trust! There are people who have been investing in the stock market for 50 years who have barely taken any notice of these “closed-end funds” but this was the year in which Scottish Mortgage Investment Trust PLC (LON:SMT) put the sector on the map, by doubling in share price.
It did it by virtue of its exposure to all those sexy (mostly) US technology stocks, including the sexiest of them all, Tesla. No Johnny-Come-Lately to the tech boom, the canny trust had bought into many of the big-name stocks at bargain prices, although they probably seemed crazy prices at the time if you are old-fashioned enough to believe that things such as assets and profits are important.
Pershing Square Holdings PLC (LON:PSH), up 63% and the fourth-best Footsie performer in 2020, was another fund on a roll, with its net asset value per share rising from 2,064p at the beginning of 2020 to 3,306p in the middle of December.
The second-best performer was Fresnillo PLC (LON:FRES), the precious metals miner, which rose 76%.
It’s been a good year for gold – the … er … gold standard for haven investments (much better than tulips) – and an even better one for silver. The latter is more of an industrial metal and less of a “vanity metal” than gold, and its use in solar panels is well-known; if you buy into the view that the economic hit caused by the coronavirus pandemic will prompt governments to invest heavily in “green” infrastructure, then silver’s rise becomes understandable.
Antofagasta PLC (LON:ANTO), another Latin American miner, albeit focused on copper, was another from the sector that had a bonanza year, rising 51%.
The third-best FTSE 100 performer was Ocado Group PLC (LON:OCDO), the food delivery technology group. The stock was up 78% and it can only be a matter of time before this British technology wonder company is bought up by the US or the Japanese as all the other UK wonder companies seem to be.
The stock was already a favourite with investors as they could see which way the wind was blowing in the supermarket sector but of course, the lockdown restrictions accelerated the trend towards shopping online.
The lockdown restrictions were not so kind to travel and hospitality stocks.
Cheap holidays in other people’s misery
British Airways owner International Consolidated Airlines (LON:IAG) lost almost two-thirds of its value in 2020 as the idea of travelling anywhere by air became almost as quaint a notion as heading off to work in a pony and trap.
Rolls-Royce Group PLC (LON:RR.), which makes aeroplane engines and more importantly earns a pile of money from servicing those engines, was similarly hard-hit by international travel restrictions and lost half of its value.
The suspicion is that although presumably the virus will be brought under control at some point, although it may require frequent vaccinations, the ability of many businesses to function well enough thanks to video conferencing may lead to a permanent reduction in the amount of air travel, at least in business class.
BP PLC (LON:BP.), down 45%, and Royal Dutch Shell PLC (LON:RDSB), down 43%, were marked down severely because the decline in global economic activity has reduced demand for the black stuff.
Airlines are also major users of oil and so any reduction in air traffic is sure to hit the oil majors hard, as they seem to realise with their belated efforts to speed up their renewable energy investments.
As if the pandemic was not bad enough, there has also been the long-running (or long-standing, if you want to be cynical) Brexit conundrum, which has not done any favours for London’s listed banking stocks.
Lloyds Banking Group PLC (LON:LLOY), HSBC Holdings PLC (LON:HSBA), Standard Chartered PLC (LON:STAN) and NatWest Group PLC (LON:NWG) suffered losses of between 32% and 42%; in contrast, Barclays PLC (LON:BARC) got off lightly with a 19% fall.