In this article, we want to take a look back at 2020 and look at what shaped the year and who the winners and losers were. Of course, a look at our real money account should not be missing. In the last part, we risk the look ahead and speculate on a few spots that are promising.
Corona shapes 2020
At the turn of the year, the financial markets were still under full pressure from the trade restrictions and tariffs on the part of the USA and China. The highlight of the year seemed to be the US election. But then everything turned out differently. The coronavirus spread in northern Italy as early as February and increasingly influenced the financial markets. The virus was already circulating in China at the turn of the year, but the fear was locally very limited and thus also the effects on the global financial markets.
From late February to mid-March, the stock markets fell across the board at a pace and severity that was unparalleled even in the greatest financial crises. The panic reached what was historic.
The S&P500 fell more than 36% in just 22 trading days. Even in 1987 and 2008 this price decline could not be reached in its rapidity.
The panic in the market, which can be seen indirectly from the volatility index VIX, soared by more than 550% within 22 trading days. As an options trader, the golden age began these days, because you could collect incredibly high premiums.
Real money account 2020
Our year began sluggishly and we were able to gain slightly until the corona crash. But then it hit us clearly, albeit not quite as bad as many stock indices and hedge funds. Our drawdown was around 25% while the market lost 36% as seen above.
Our real money account has grown by around 50% since the start of the year and even 88% since the drawdown. Of course, we would have preferred it if we had achieved 50% performance without a drawdown. Nonetheless, we are very proud to have achieved a 50% return in such a complicated year.
Winner and Loser 2020
The extraordinary circumstances of 2020 changed everyday life in many areas and often even lastingly. Working life in particular has changed in such a way that working from home will probably be much easier to implement in the future, as many employers are promoting this more and more. This process meant that commercial real estate and business travel were less of a focus. On the other hand, there are solutions that push the home office. These include food delivery companies, meeting software or rental car providers.
As already mentioned, providers who push home offices are the focus of investors. So it is not surprising that stocks like Amazon or HelloFresh have risen sharply.
Since the outbreak of the corona crisis, the online retail giant Amazon has grown by over 60%.
The increasingly popular supplier of food boxes to cook yourself is booming and is currently not meeting the orders. The share is also fighting its way from all-time high to all-time high and has gained over 220% since the outbreak of Corona.
The losers of 2020 will very likely continue to underperform, as it is not foreseeable how they can ever make up the lost sales from 2020. In addition to the event industry, the losers include the aviation and tourism industries.
American Airlines fell over 70% at its peak. The recovery is progressing very slowly and it remains very uncertain when the price levels from the beginning of February can be reached again.
The tourism industry has been hit hard. The cruise operator Carnival Cruises fell by over 85% at its peak and there is still a very long way to go to old heights. We are avoiding the tourism industry in the coming year as it is very uncertain when the pandemic will end despite the vaccine.
Specials in 2020
The year 2020 of course also had very special events and black swans in store. In the first place to mention is the historic record low of the oil price of the WTI. The price for a barrel of oil in the May contract fell into negative territory! Yes, you read that right, the oil price was negative because nobody wanted more oil.
May contract in oil of the WTI
A price always comes about through supply and demand. However, if nobody wants the product anymore, then the providers who absolutely have to get rid of the product are willing to pay something for it. This unique circumstance was caused by the fact that the storage options were exhausted and the end of the term and thus the delivery time had been reached.
Bitcoin has reached its all-time high in the last few days and has risen sharply from its annual low:
Tradimo continues to stay out of trading cryptocurrencies, as the movements are often irrational.
The actual event of the year moved into the background, but should still be mentioned in our annual review. We don’t stop the count 😉
In the run-up to the election, Biden was clear in the forecasts as the clear winner for a long time, but an unfortunate statement in the last TV duel shook everything again and the election result was very uncertain. Many business owners and homeowners secured their buildings as if they were impending hurricanes, fearing unrest. Fortunately, it didn’t come to that and the election winner was determined 4 days after the election: Joe Biden.
The stock markets reacted with diminishing panic and confidence. Volatilities fell, which also drove the profits in our real money account to a large extent.
Outlook for 2021
We also expect a year of increased volatility in 2021, which will benefit many of our trades. Should Volaspikes happen again, we will achieve our target annual return of 40%. Products that are then in focus are VIX spreads and the VXX, possibly also the UVXY.
We still see providers who support the home office as potential winners in the stocks, but also stocks from online shopping. In addition to stocks, we have been waiting for good spots in the grain markets for some time. We want to take some short positions there when the environment is right.
We expect the losers to be the stocks that disappointed in 2020. When we talk about losers, it doesn’t have to be negative share price developments. It might be better to speak of underperformers. These values should also include titles from the tourism and aviation industry in 2021.