This article refernces the weeks at the end of December leading up to January
Spotlight on Tesla
Tesla has gone from strength to strength in 2020 despite being a challenging year for many economies across the globe due to the coronavirus pandemic. The electric car firm has had its shares grow by more than 700% in 2020 as is now valued the highest amongst car companies across the world. In response to its new status, Tesla was added to the S&P500 on the 21st December and is already one of the top 10 most valued companies on the index. Tesla owes much of its success in the stock market to improving car sales which have been boosted by strong demand from the Chinese market as well as the potential subsidies for electric vehicles in the future.
However, there has been recent talk about the potential overvaluation of shares for Tesla and JPMorgan analyst Ryan Brinkman has warned investors against raising their holdings in the company. However, other experts have stated that Tesla is more than just a car company as it has opened up a market for other electric goods and has played a vital role in the transition from fossil fuels to renewable energy.
Going forward, it is expected that Tesla won’t see as strong growth in 2021 with the number of competitors growing as Apple has renovated plans to build an electric car alongside several Chinese competitors.
In the last week of 2020 trading, last Tuesday the FTSE 100 leapt up to highs not seen since early March, closing 1.6% higher at 6,602.65 in response to the Brexit deal reached on Christmas Eve, reaching levels of 2.2% throughout the session. Markets resumed trading on Tuesday 29th following the Christmas break and last Monday’s public holiday. This presented the first opportunity for markets to react to the joyous news of the £668 billion Brexit deal with the E.U. and the U.S. stimulus package.
Markets initially continued to climb last Wednesday morning following news of the AstraZeneca and Oxford University vaccine approval for use in the U.K. The storage temperatures of 2-8 degrees Celsius are further good news, reducing its rollout complications. However, the index then reversed earlier gains to close down 0.7% following negativity arising from increased coronavirus restrictions, with the majority of England plunged into tier four restrictions.
The FTSE 100 ended the trading year on a sourer note last Thursday, closing at 6,460.52, 1.5% lower. This contrasts to the 2019 close of 7,542, showing what a tough year 2020 has been. The index is down 14.3% year-to-date. This represents the FTSE 100’s worst annual performance since 2008. The markets deteriorated as fears over the increasingly serious coronavirus situation become top of mind for investors, with the opening of schools postponed. This led to shares in pandemic beneficiaries, such as Just Eat, rising, and shares in travel companies, such as IAG, falling.
The S&P500 reached a record high last Monday as news of President Donald Trump finally signed a $900 billion fiscal stimulus package propelled stocks higher, fuelling optimism surrounding an economic recovery. The package is the second-largest in U.S. history, following the $2.3 trillion stimulus package approved in March. This came as a massive relief following months of tumultuous negotiations, providing immediate help to the desperate economy. Moreover, news of the previous week’s Brexit deal further supported gains. The S&P500 closed up 0.6% to reach a record high of 3,756.07, representing an impressive 16% gain for the index year-to-date. This followed optimism arising from coronavirus vaccines and further U.S. stimulus.
An overall positive week for the Dax, with the index reaching a record high of 13,903 last Tuesday, building on record levels reached the day before. This was due to excitement surrounding the last-minute Brexit deal, leading to gains in shares in carmakers such as V.W., BMW and Daimler. Not reaching a trade agreement would have been catastrophic to their businesses. Moreover, the coronavirus vaccine's rollouts were well received by markets, bringing hopes of economic recoveries across Germany and wider Europe. However, the Dax finished the year last Thursday on a downbeat note, falling 0.3%, partly due to the imposition of tariffs on some E.U. goods by the U.S. This was the continuation of a 16-year dispute between the U.S. and E.U. regarding aircraft subsidies. Each side claimed each other’s aeroplane manufacturers receive unfair subsidies. Nonetheless, the Dax overall made gains of 3.5% in 2020, showing the year was not all doom and gloom.
Stocks in Asia-Pacific were mixed on Tuesday following overnight gains on Wall Street that sent the major averages to record highs. The overnight news was light with investors closely watching for any fresh fiscal stimulus news from the United States. However, the U.S. Dollar continued to weaken against major currencies, indicating that demand for risk would likely remain at heightened levels. Japan’s Nikkei share average ended lower on the last trading day of the year, falling from a more than three-decade high hit in the previous session as investors made profits. However, there were still gains made for the second year running. In 2020, the Nikkei was up 16% compared to an 18.2% gain in 2019. It rose nearly 18.4% this last quarter, making it the biggest quarterly gain in three months since March 2013. Stocks in the Asia-Pacific were again mixed in Wednesday trade, as indexes on Wall Street broke their winning streaks overnight.
Overall, the last week of 2020 ended on a relative high for stock markets across the world, given the record lows that were hit this year. The recent approvals of vaccines against Covid-19 provide a glimmer of hope that the pandemic might be coming to an end. Moreover, the Brexit deal will allow for further recovery in stock markets and global economies going into 2021.