05th Jan 2021 by Josh Matthews, HBA

Annus Horribilis II

2021

Back in January 2009, when MASECO was only 6 months old, our “Year in Review” article was named Annus Horribilis and covered the 2008 Global Financial Crisis. From a humanitarian and economic perspective, 2020 will be also be remembered as an ‘Annus Horribilis’ and will go down in the record books as one of the strangest years in memory.


2020 started off with Iran shooting down a passenger airplane and uncontrollable fires across Australia burning large parts of the continent and creating the largest animal habitat crisis in the country.

By February COVID-19 was spreading quickly in Wuhan and the province of Hubei went into lockdown.

In March COVID spread rapidly across the globe as Italy and other countries outside of China were hit hard, overwhelming hospitals and leading to the first ever global lockdown. From a portfolio perspective, local currency government bonds surged as investors fled to more defensive asset classes. The Templeton Global Total Return fund was caught out as it was positioned for US interest rates to rise and emerging market currencies to appreciate. In the month of March the Credit Suisse Managed Futures fund appreciated 3.35%* as the US S&P 500 fell 26.28%*. To add insult to injury, as oil demand plunged due to the lock downs, Saudia Arabia instigated a price war with Russia and oil prices fell in the steepest one-day decline since 1991 (Bloomberg). Oil prices continued their decline to their lowest levels since 1998** and on April 20th 2020 short term WTI futures were actually negative for the first time in history*** as there was extremely low demand for oil and no place to hold oil reserves.

As fears of a second depression emerged, central banks across the world sprang into action by cutting interest rates and aggressively flooding the markets with liquidity. This stopped the slide in equity markets which started their rebound in the dying days of March and continued right up until the end of the year****. 

In April, the US unemployment rate soared to 14.7% (US FRED) and furlough schemes across the developed world were introduced in an effort to ‘freeze’ the economy during lockdown. In addition to panic buying of toilet paper, pasta and rice, products such as Peloton, Zoom and Netflix saw a huge surge in demand. Amazon, Ocado and other delivery services also benefited from the lockdown. Amazon’s founder, Jeff Bezos’s net worth soared over the course of the year and he is now worth more than $170bn (SEC filings). As global lockdowns hurt economic activity and GDP growth across the world plunged, healthcare companies started work on finding a COVID-19 vaccine.

In May, the death of George Floyd in Minnesota led to civil unrest across the US and global support for ‘Black Lives Matter’.

Over the course of the summer new daily COVID cases fell and most of the northern hemisphere survived the first wave. According to The Economist, over the ensuing months the travel and hospitality sector recorded the largest fall in revenues on record and international tourism saw a 70% decline from January to August.

During the summer, MASECO held numerous emergency investment meetings and by the end of the summer repositioned our core portfolios based on lower interest rates, inexpensive equity valuations and the new normal. In broad terms, we recommended the removal of managed futures and commodities from portfolios and increased our allocations to small, value and international companies, which were priced very attractively relative to historical valuations.

During the autumn, the US presidential election took centre stage with the Democrats ultimately winning a polarised victory and Donald Trump claiming widespread election fraud. Days after the election, Pfizer/BioNTech announced the results of their vaccine trials giving the world hope that COVID could be beaten. Global stock markets surged and small, value and international stocks appreciated faster than their large, growth and US counterparts resulting in new portfolio highs for clients who rebalanced to the new allocations in September 2020.

As of the end of November, more than 70 million people have been infected with COVID-19 resulting in more than 1.6 million deaths making COVID-19 the largest cause of death in 2020 and the second most fatal virus since the Spanish Flu that spread across the globe just over 100 years ago (John Hopkins University & Medicine).

In December, the UK and Europe struggled to finalise Brexit agreements as COVID cases in most of the world surged to new highs and additional lockdowns went into effect. By mid-December vaccines started to inoculate vulnerable people in developed countries and the holidays were celebrated with new hope for the future.

From an investment perspective, all core portfolios reached new highs as we collectively weathered the COVID storm during this Annus Horribilis.  As we move into 2021, we look towards a brighter future where COVID can be better managed and we start to rebuild the global economy.

Source (4th January 2021): 

*Koyfin (CSAIX & SPX) 
**(https://www.macrotrends.net/1369/crude-oil-price-history-chart) 
***New York Mercantile Exchange 
****MSCI (ACWI – global equity index) 

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  • Nothing in this document constitutes investment, tax or any other type of advice and should not be construed as such. 
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Performance: 

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MASECO LLP (trading as MASECO Private Wealth and MASECO Institutional) is a limited liability partnership registered in England and Wales (Companies House No. OC337650) and has its registered office at Burleigh House, 357 Strand, London WC2R 0HS. 

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is an SEC Registered Investment Advisor in the US.
The partners are Mr J E Matthews and Mr J R D Sellon; Mr D R B Dorman, Mr H Q A Findlater, Mr T Flonaes, Mr N B Tissot, Ms A L Solana.

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