Global Matters Weekly – 30 November 2020

A Brief History of How to Lose Money

by Richard Stutley, CFA
With global equities on track to deliver their best-ever month, against a backdrop of the deepest recession since the Second World War, investors are understandably questioning whether markets have come back too far and too fast. Valuations appear rich in certain areas but trying to time the market is notoriously difficult and can lead to disappointment. At times like this it is worth reflecting on the common ways in which investors suffer permanent impairment of capital as opposed to short term fluctuations in the value of their investments. While the history of finance is long and varied, three factors appear time and again in this regard: counterparty risk, leverage and liquidity. This is a good place for investors to start when appraising risk in their portfolios.

Market Snapshot

  • Global equities rose +2.4% last week on the back of further positive vaccine news
  • The Oxford/AstraZeneca vaccine has been shown to have a high efficacy rate, though this will be subject to further testing
  • Brent crude rose +7.2% ending the week at$48.2 a barrel
  • Gold fell -4.4% to end the week at $1787.8 an ounce