2020, the crazy year of financial centers

Published on : 30/12/2020 – 12:43

Despite the Covid-19 and the economic crisis, the American stock market ended the year in full euphoria, in unison with most other financial centers. Yet 2020 has not been a long quiet river.

An extraordinary, incredible year that bears no resemblance to the previous ones: since January 1, the American market has been playing a roller coaster. After an optimistic start to the year, driven by the trade truce found between Beijing and Washington, the stock market suddenly plunged in February, losing nearly 40% of its value in one month after the announcement of containment, to rebound even more strongly from summer. As if the Covid-19 and the economic crisis had disappeared. Never has the stock market experienced such a rapid recovery. And once again, as after the financial crisis of 2008, it is thanks to the Federal Reserve. By massively buying back debt to support the economy, by keeping rates close to zero, the American central bank, followed by all its counterparts, has eliminated the risk of bankruptcy, which will instantly calm the markets and even propel their activity.

A euphoric stock market disconnected from the real economy in the midst of a crisis

With the paralysis of trade, unemployment, oil that drinks the cup. All this also makes losers on Wall Street, the shares of majors, airlines or casinos collapse but it does not appear in the dashboard of the American index, their rout is obscured by the spectacular progression of GAFA , the heavyweights of the American stock market have become indispensable in the lives of the confined. These 5 internet companies alone represent 25% of the index aggregating the top 500 American companies and their rating has literally exploded: + 70% for Amazon + 80% for Apple. The strength of this uptrend is also fueled by frenetic speculation from individuals. Idle, they started to spit. It is a global phenomenon that can be observed in the United States as well as in India or in Europe. Instead of consuming, we invest our savings which no longer bring in anything in the West since the rates are close to zero.

The good news from the health side celebrated on the stock market

With the discovery of vaccines, the price of biotechs and labs soared. And there is also the good political news: with the victory of Joe Biden in the United States and a trade deal in extremis to seal Brexit in Europe, the prospect of a climate more open to trade is reassuring and the stock markets are ending the crisis. year with a bang. The Dow Jones reached a new high in November, surpassing the 30,000 point mark and other stock markets are recording historic records, Tokyo for example returning to a peak never reached for thirty years. The European stock markets are slower to recover, but they too are ending the year on a high note.

Will this bullish spiral continue in 2021?

On the stock market there is no perpetual movement, the market will eventually fall, but it is difficult today to find a predictive index for 2021. The Bank for International Settlements, the policeman of central banks, warns that the bankruptcies that are profile could suddenly turn the trend. Financial experts, for their part, scrutinize historical data and find that 2020 looks furiously like 1999, the year when the internet bubble was formed. A bubble that eventually burst.

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