Market Update

T con Zero - Awakenings, or the investor who mistook the market for a hat, 2020 edition

T con Zero - Awakenings, or the investor who mistook the market for a hat, 2020 edition

2021 just started. We are still on time to have a look back at the full picture of 2020 for equity markets. Some numbers confirm it was an unusual year.

An investor’s work, on paper, might seem simple. They decide how to put to work, on financial markets, open to all or private, resources of their own or entrusted to them by clients. Decisions are made on the basis of specific criteria and rules, which investors call investment processes and which lead to the creation of a set of assets, called a portfolio. The value of this portfolio depends on market movements. Many markets, including equity, show some volatility, that is, the prices of financial assets can move, up or down, significantly over short time horizons. There is a very positive fact for investors - that over long time horizons, financial markets, both equities and bonds, have shown a clear upward trend.

Today we want to focus on the daily changes in prices on the major equity markets. Because it is true that in order to assess an investment opportunity and the results it has produced, in particular on the stock market, it is necessary to give an extended and multiannual time horizon, but it is also true that the long term is nothing more than a sequence of shorter periods. The single day is a useful unit of measure to split time and can help us put the financial events of 2020 in a correct historical perspective.

I have previously counted and analyzed the daily movements observed in the history of the main stock markets, dividing them between positive and negative and then, in a fragmented way, by intervals of performance. The image that resulted from this analysis, published about a year and a half ago for the first time, may remind the reader of a hat, or of the image of the “boa constrictor digesting an elephant” in Antoine de Saint-Exupery’s The Little Prince.

Downoad the full paper to learn more.

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  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • All data is as at 31 December 2020 unless otherwise stated.

    This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

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