We are already reaching the end of 2020 and from the stock market point of view, I have never experienced a year like this. Now that it is ending, I can say that of all the years that I have been investing in the stock market (19) this will undoubtedly have been the one that has made me learn the most. 2020, from a stock market point of view, has been able to bring out the best and the worst in us.
We started the year with the US indices in the area of historical highs, we followed a few months with dizzying declines and drops of between 30 and 40% to end the year, once again at historical highs.
Technology, therefore the Nasdaq, has been the big winner of the year. Nobody, I repeat, NOBODY would have said in March that in just 9 months the Nasdaq would have more than doubled in value.
The rest of the US indices have followed the same pattern as the Nasdaq but at a clearly lower rate.
EUROPE is something else, and the Ibex (lately dubbed The PUPAS), only began to show signs of recovery in late summer. Today it seems that it is beginning to recover ground but it is still far from January 2020’s numbers, there is still a long way to go.
What have I personally learned?
1.- If an index falls by 30/40%, buy it, it doesn’t matter if it continues to fall by 50/60%. When we talk about long-term investment, the reason for a fall is usually due to “something” that sooner or later will have a solution, that index will return to its valuation at some point. A year from now, people will be back on airplanes, drinking Coke and shopping at ZARA.
2.- My knowledge of technical analysis was not enough to take advantage of this opportunity.At the beginning of the year and coinciding with the first news from hospitals in China, I liquidated all investment portfolios, maybe it was luck, maybe it was some experience, I don’t know. The fact is that I saw the entire stock market crash sitting comfortably in my chair with practically 90% liquidity. The problem came when I was not able to detect that the falls were already ending and therefore I was facing a historic opportunity.
This has led me to train in an area that I only knew in passing, Volume. Today I am much more prepared to face abnormal situations within the markets
What can we expect from 2021?
As I have commented before, the European indices and specifically the Ibex are far behind the US indices. That is becoming an investment opportunity.
COVID will pass, we will travel, have dinner, shop, put gas, etc … This should lead to listed companies recovering pre-Covid prices. It will depend on each person to know how to choose these companies, in my case the only ones that do not enter (or will enter more) in my investment plans are companies in the Banking sector since I consider that it is a sector in decline, destined to disappear.
The storm clouds, or not, may come from the US side. Let’s not forget that their indices are going to end up in areas of all-time highs. To a large extent, this rise is catalysed by the stimuli of the Fed and the problem is that we do not know how long they will continue to feed the American stock markets. This brings us to the famous stock market saying … “If the USA sneezes, Europe catches a cold…”. Well, let’s hope the USA does not sneeze in 2021…
JORDI MARTÍ
Head of Studies of Canal Trader school
@JordiTrading
