2020’s impact on markets has been significant

2020 will undoubtedly go down in history as the year of the Covid-19 pandemic. The impact on markets has been significant, and this article takes a closer look at the performance of a few asset classes during 2020, and what we might expect of them in 2021.

Local shares


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What a year it’s been for shares! Following the FTSE/JSE All Share Index’s (JSE) performance for the five-year period ending December 31, 2019, during which it couldn’t even yield 6% pa returns, all hopes were set on 2020 to be the year of recovery. Instead, global markets saw one of the biggest crashes since 2008 when Covid-19 was officially declared a pandemic. By March 19, 2020, the JSE was trading 30% lower than at the beginning of 2020.

From 1987 until now, the JSE has only declined by more than 30% on five occasions. Although it was trading at higher levels on all four prior occasions, the recovery experienced during this correction has by far been the most aggressive. As at the time of writing, the JSE was trading in positive territory for the year.

With financial stimulus slowly finding its way to local shares, and an interest rate environment that will most likely stay low for longer, it is difficult not to get excited about the future of local companies.

Offshore shares

While offshore shares (MSCI All Country World Index/ ACWI) experienced the same collapse as local markets, they have recovered even faster than the JSE (especially US companies). Many experts feel that the US is currently on the more expensive side. They advise investors to exercise extreme caution, and not base their decisions only on recent returns. After all, the US market traded at similar valuations between 1999 and 2009, and thereafter delivered negative returns for an entire decade.

If analysts (consensus) price targets for ACWI companies are 100% correct, no growth is forecast for the next 12 months. If you dig a little deeper, however, you realise that if you exclude the USA, there are still many investment opportunities in areas like Europe and Britain, and in emerging countries like China. Therefore, I won’t reserve an underweight position for offshore shares in my portfolio (I’d classify myself as neutral), but I most certainly won’t let last year’s “winners” take the lead in my portfolio.


This is not the time to invest in international bonds, given where the world currently finds itself in the interest rate cycle. Local bonds, however, tell a different story. I believe that South African Government Bond Yield 10Y at around 9% currently, has most of the risks priced in, which justifies an overweight position for the next 12 months.

Property shares

I believe that there are some opportunities starting to emerge in this asset class, both locally and offshore. However, I also think the risks outweigh the possible opportunities and I would remain cautious. For now, I would remain underweight in property shares, at least until we have more certainty regarding this asset class.


With basically no interest rates in developed countries and current local money market rates just below 3.5%, cash looks set to deliver negative real growth for investors, if you work according to the International Monetary Fund’s (IMF) expected inflation figure of 3.88% for 2021 (year-end 4.3%). Considering this, cash will have an underweight position in my portfolio in 2021.

Schalk Louw, financial adviser at PSG Wealth.