S&P Dow Jones Indices: 2020 -Timing and speed of the markets recovery around the world differed greatly

S&P Dow Jones Indices has published the latest analysis on how stock markets declined in 2020 and how the strength of the subsequent recovery was significantly different around the world.

Sherifa Issifu, Associate, Index Investment Strategy at S&P Dow Jones Indices comments that on the surface, it was a good year: the S&P Global BMI finished with a full-year total return of 17% in U.S. dollars, with both emerging and developed components performing similarly. However, Latin America, Eastern Europe, and the U.K. closed 2020 lower—driven by risk-off sentiment and an initial move to safety that led to their slower recoveries. Meanwhile, the Nordic markets outperformed, while China and South Korea soared.

Highlights

Northern European countries were among the first to return to their highs, with Denmark taking just over two months to do so, and recovery times across the Scandinavian region averaging only four months. However, the global recovery really began with China: the S&P China BMI saw a smaller drawdown in March, setting a lower hurdle for redemption. At the bottom of the spectrum, many Latin American countries and the U.K. still have some catching up to do.

Currency was a major factor in the performance of some markets, and Brazil in particular. In local currency terms, the S&P Brazil BMI had a respectable gain of 6%, but it declined 17% in U.S. dollar terms, driven by a 23% weakening of the Brazilian real (BRL) in 2020.

A similar impact from currency meant 2020 gains dwindled when converted into U.S. dollars across several emerging markets, including Russia, Turkey, and Mexico. Part of this disparity was a result of the differences in the ability of countries to provide stimulus to their economies during the COVID-19 pandemic.

The S&P Europe BMI was lifted to a positive return (in U.S. dollar terms) entirely thanks to currency movements, after a 9% swing in the euro versus the U.S. dollar in 2020. There were similarly large moves for the greenback among a range of developed market currencies, including the Australian dollar (AUD) and the Nordic currencies (SEK and DKK).