January 04, 2021 13:00
2020 will be remembered as the year of lockdowns and uncertainty due to the global crisis caused by the Coronavirus pandemic that began in February.
The fear and uncertainty of this situation caused sharp falls in the stock markets and in oil due to the closures that occurred in practically all the countries of the world, generating strong declines in GDP along with a strong destruction of jobs worldwide, although the situation was improving thanks to the different stimulus programs carried out by different countries and international organizations to try to alleviate this crisis.
Hope came during November, after positive results of the vaccines in development were made public, along with the start of the vaccination process during December with approval from the FDA, the European Union, and the United Kingdom.
Despite this, the positive performance of the major stock market indices in 2020, some reaching historic highs, is another indication of the decoupling between the real economy and the financial markets. If we analyse the situation in depth, we can see that economies have been heavily influenced by government aid, low interest rates and liquidity injection policies through debt purchases by central banks. We can, therefore, observe a dramatic increase in the level of national debt in various countries, making debt levels look very challenging.
On the other hand, 2020 has also left us with an agreement between the EU and the UK regarding future trade, meaning we can finally put an end to this issue which has seemed like a never-ending story since the UK’s referendum in 2016.
If we focus on the US indices, we can see that last year, the SP500, NQ100 and DJI30 ended the year with record highs, with annual increases of 15.5%, 43.4% and 6.6% respectively.
Without doubt, the great protagonist was the NASDAQ, thanks to the strong performance of technology stocks, such as Apple, Amazon and Tesla. At the end of March, after the sharp falls at the beginning of the pandemic, it had reached annual lows of around 6,640 points. From this low, there was an incredible bullish rally that led, not only to it recording a historic high, but also coming close to reaching 13,000 points.
Despite the overbought levels that we can see in the stochastic indicator, the upward trend seems intact, with its 3 moving averages up and the price repeatedly supported by its 18-session average in black. As long as the price does not lose its previous resistance level, which now acts as its main support level (red line below), we do not expect a further correction.
Source: Admiral Markets MetaTrader 5 Supreme Edition platform NQ100 daily chart (from October 4, 2019 to January 4, 2021). Taken on January 4, 2021. Note: Past performance is not a reliable indicator of future results or future performance.
In 2016, the NQ100 rose by 5.89%, in 2017 by 31.52%, in 2018 by 1.04%, in 2019 by 37.96% and in 2020 by 43.4%.
If we shift focus to Europe, we can see how the DAX30 rose by around 3.6% last year, leading the German index to record highs. Other indices, such as the Euro Stoxx, CAC40, IBEX35 and the FTSE100, lost around 5.1%, 7.1%, 15.5% and 14.3% respectively, despite also experiencing strong rises following losses at the beginning of the pandemic.
If we look at the daily chart below, we can see that the upward trend has taken on a new impulse after the definitive break of its previous resistance level (green) from the strong lateral movement that it took during the second half of the year. The break of this resistance led to it overcoming its previous historical high.
Source: DAX30 daily chart from Admiral Markets MetaTrader 5 Supreme Edition platform (from August 22, 2019 to January 4, 2021). Taken on January 4, 2021. Note: Past performance is not a reliable indicator of future results or future performance.
In 2016 it rose by 6.87%, in 2017 by 12.51%, in 2018 it lost 18.26% in 2019 it rose by 25.48% and in 2020 it rose by 3, 6%
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