FO's Perspectives Weekly Newsletter
Happy new year! But let's take a quick review of the last week of 2020..n
Stock Market review (end of year review)
US
2020 was an interesting year for the stock market to say the least! it kicked off with the crash in March which saw some of the worst single-day losses in history. However, what followed it was even more extraordinary with the rebound as aggressive and as fast as it’s fall. Considering the US economy has not even recovered yet with near-record amounts of people still out of work, the fact the US stock market has reached all-time highs says something. With an abnormal level of returns within tech stocks, it is apparent that a bubble has formed and it will be interesting to see how 2021 unfolds in regards to this bubble.
2020 returns:
S&P 500: Up 16%
Dow: Up 7%
Nasdaq: Up 43%
Want to know what each index is? You can find out here
Europe
2020 has been a rollercoaster of a year for the European stock market just like the US. Europe also felt the brunt of the march crash with the FTSE 100 suffering its biggest one day fall since the 2008 recession. Europe, however, was unable to regain its losses to the same extent as America and thus most indexes ended the year lower. With europe’s gains not exploding like the US this year, there may be scope for a boom in 2021.
2020 returns:
FTSE 100: Down 15.04%
DAX: Up 3.55%
Stoxx 600: Down 4.93%
Finance
The US has approved the use of direct listings for companies going public which is set to shake up the IPO market
What is are IPO’s and direct listing?
IPO’s are initial public offering is when a company decides to go public and sell those shares to the public. The conventional method was to go to an investment bank as a broker in order to do so as they will be able to price your company and find the investors to buy shares of your company. However direct listings mean that firms can sell their shares directly to investors. The issue has been that using investment banks as middlemen to go public has meant that firms have been valued inefficiently as investment banks may undervalue firms in order to make sure that they sell all the shares they’ve been asked too.
Why is this important?
This new rule will drastically shake up the IPO market as it will essentially cut out the middlemen - your investment banks. Investment banks make a significant portion of their revenue acting as advisors and underwriters for firms going public and thus will be in a precarious position. This change is also important as it will democratise the stock market even more as it will allow retail investors more access to IPO’s at the same time as institutional investors, allowing them to benefit from gains at the same time. Lastly, after the stock market IPO’s this year which have seen shares soar on the opening day of trading, firms will be able to raise more capital.
Tesla short-sellers lost $38 billion throughout the automaker's colossal 2020 rally.
What’s happened here?
While Tesla’s astronomical year has made many people millionaires or increasingly wealthy, there are people on the other side who have made huge losses shorting the stock. Tesla stock in 2020 rose 672% which meant that short sellers - who thought the ballooning stock would tumble faced a hefty loss. It will be interesting to see how Tesla fairs in 2021, with a hope that economies start to return to normal and a tech bubble which may slow down.
FTSE 100 suffered its worst year since the 2008 financial crisis in 2020 - The FTSE 100 index fell 14.3% over the year, marking its worst performance since 2008 when it slumped 31.3%.
Read about how Trump has upped the EU-US trade conflict by putting tariffs on aircraft parts and beverages from the EU here
Ryanair and Wizz Air are to take away the voting rights of UK shareholders as a result of Britain’s exit from the EU.
Read about why interest rates might rise sooner than expected due to a global recovery here
Politics
Sir Keir Starmer has faced a rebellion over his decision to back Boris Johnson's EU trade deal on Wednesday: Three Labour frontbenchers have quit their roles after defying leader Sir Keir Starmer's order to vote for the PM's post-Brexit trade deal
Millions more have been moved into tier 4 as a record number of daily cases has been reported this week in the UK due to the spread of a new strain of Covid-19.
EU and China have finally agreed on a delayed but historic new investment pact. read about how this will affect US and EU relations here
The UK has officially left the EU bringing an end to this chapter in its relationship with the EU and opening a new one.
Technology
Elon musk admitted he once tried to sell Tesla to Microsoft
UK internet use more than doubled in 2020, as people stayed home during the coronavirus pandemic
Adobe Flash Player, the browser plug-in that brought rich animations and interactivity to the early web, has officially reached the end of its life.
Weekly Portfolio review
The end of my first trial portfolio is here
Portfolio 1 (high growth) - As expected, this was the more successful portfolio out of the two with my focus on tech and disruptive stocks serving me well as I benefited from the apparent tech bubble we encountered in 2020. While my biggest gainers were in this stock, so was my biggest losers as the relatively high-risk nature of this portfolio showed out.
Portfolio Returns: 2.3%
Biggest Gainer: Plug Power - 35.12 %,
Biggest Loser: Aurora Cannabis - (-)11.97%
Portfolio 2 (Balanced portfolio) - My balanced portfolio finished with lower returns than my high growth, but the diverse nature of the portfolio with limited weighting to high growth stocks meant that this was always the case. As expected the largest gainer and larges loss were both growth companies picked with my defensive and blue-chip stocks remaining largely stable.
Portfolio Returns: 0.97%
Gainers: Tesla - 24.17%
Losers: Canopy Growth- (-)10.58%
What I’m reading
This week’s book recommendation is Continental drift by Benjamin Grob- FitzGibbon. With Brexit finally completed, I feel this book is crucial in understanding the nature of Britain’s rocky relationship with Europe and how it has led us to where we are today. This book also explores the link between Britain’s colonial legacy and British exceptionalism and how it formed the base for Britain’s exit from the EU.
You can buy the book from the link below!
Podcasts
There was no podcast this week but we can delve into our consulting episode as part of our career insight series podcast. We welcomed Okiki, a technology consulting analyst at Accenture on to the show. In this episode, we looked about her unique route into the industry studying a STEM degree and why studying a non-traditional subject can actually put you at an advantage. Okiki takes us through the varied day of a consultant and Lastly, we also went through the application process, looking at what the key skills consultant firms look for and how to ace the dreaded case study interview.
Stat of the week
$1 trillion - how much the 650 billionaires in America made during the pandemic. The pandemic has raised questions over wealth inequality and disaster capitalism in America, especially as ordinary Americans have received only one $600 stimulus check since the pandemic started.
Quote of the week
“Whether you think you can or think you can’t you’re right” - Henry Ford
Belief and mindset is arguably 80% of the job when it comes to achieving something. Most people are usually defeated before even trying something because they have mentally prepared to fail than to succeed, In this 2021, let us all have a positive mentality in chasing our goals and dreams. It will be that belief and positive mindset which will help push you towards your goals!
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