It was the best of times. It was the worst of times. Will we experience anything like 2020 ever again? History is famous for repeating itself. But it would be a Festivus miracle for all the stars and planets to align, like the Great Conjunction, in 50 years. In the future, economists and financial analysts will look back at this year as perhaps the craziest, most upside-down, face-palm-inducing time, and completed with non compos mentis. So, what were its highs and lows? Here are the top ten business and economic stories of 2020.
Money Printer Go Brrr
Chair Jerome Powell took the Federal Reserve where no other Eccles Building had gone before. The U.S. central bank cleaned up the blood on the streets when it announced emergency cuts to interest rates, bringing them to nearly zero. The Fed then shocked everyone by unleashing unlimited quantitative easing (QE), including acquisitions of Treasurys, corporate bonds, and mortgage-backed securities. In just a few short months, the Fed’s balance sheet exploded to more than $7 trillion – and there is no sign that the central bankers will tighten heading into 2021.
Uncle Sam Goes Broke
As part of efforts to flatten the curve in two weeks, which turned out to be nine months, the United States shut the country down. Millions were placed under house arrest, businesses were closed, and politicians were running wild with power and money. This led to an explosion of the federal deficit, totaling $3.3 trillion by the end of the fiscal year, most of which was monetized by the Federal Reserve. The national debt spiked to around $28 trillion and counting. Before you know it, Uncle Sam is going to be $30 trillion in the hole.
Black Monday 2020
Black Monday, dead cat bounces, and circuit breakers dominated the financial markets in March. It was ugly out there, sending the Dow Jones Industrial Average to an eye-popping low of 18,213.65. It was not any better for the Nasdaq Composite Index and the S&P 500, with each index cratering to 6,631.42 and 2,191.86, respectively. Nine months later, these indexes finished 2020 trading at all-time highs. It is as if nothing happened, and everything that occurred in March was a nightmare.
A Company About Nothing
Out of nowhere, one of the biggest frenzies in the equities arena was the special purpose acquisition company (SPAC) bonanza. Also known as a blank-check firm, this type of business could be the plot of a Seinfeld episode as it does not have a business plan, maintain an objective, or sell something of value. While they have been around for some time, SPACs are now a $33 billion industry, and even Joe Biden has ties to one. If 2019 was the year of the IPO, then 2020 was the year of the SPAC.
Robinhood: Men in Tights
Robinhood, the commission-free stock trading platform, was one of the top headlines in the business world this year as thousands of armchair traders hopped on the website and tried to become the next Warren Buffett. These folks were placing their bets on the airlines, cruise ships, and even bankrupt retailers (see below). They yielded tremendous returns, even beating some of the multi-billion-dollar hedge funds on Wall Street. The men in tights reigned supreme, even if only temporarily.
Baby, Don’t Hertz Me
Who knew that going bankrupt would be the best thing for your share price? That is what happened to Hertz, the century-old car rental company. The business, which was decimated due to the coronavirus pandemic, had metastasized into a penny stock before skyrocketing more than 1,000% to around $6. But it was not only Hertz that faced this unprecedented trading strategy. J.C. Penney, GNC Holdings, Chesapeake Energy, and Whiting Petroleum were bankrupt or entered restructuring arrangements and witnessed monumental growth in their share price. Reality has settled in, but there was a period where you could have made a killing by following Robinhooders into battle.
A Weekly Paycheck
Exchange-traded funds (ETFs) usually pay a monthly or quarterly dividend. Some of them play the long game and hand investors a few pennies at the end of the year. One investment vehicle became the first to offer a weekly payout: the SoFi Weekly Income ETF (TGIF). The ETF, which invests in dollar-denominated investment grade and non-investment grade fixed income securities, launched in October, and it pays a nickel a share every week. Who says the finance sector does not breed innovation?
Gold Glitters, Silver Shines, and Bitcoin Booms
The precious metals cratered at the height of the COVID-19 pandemonium. However, as inflation fears swept the world, gold and silver prices skyrocketed. The yellow metal soared to a record high of $2,089.20 an ounce and its sister metal popped to a seven-year high of $29.915.
Bitcoin, the peer-to-peer decentralized digital currency that has no longer been confined to the basements of tech-savvy introverts, exploded to an all-time high in December, topping $24,000. Will it go higher, or will it experience a correction as it did during its last record-setting rally?
A Glass of Sweet Texas Tea
In the future, you will be able to tell your grandchildren that you were alive when crude oil prices slipped into negative territory for the first time ever. You can tell them that investors dumped their contracts on the market at a loss so they would not have to accept delivery of oil barrels. You can sit by the fire and explain to them that you witnessed an incredible rebound in the following months. You can laugh about how you scooped up rock-bottom shares in Exxon, Suncor, Chevron, BP, and Halliburton and made handsome profits that will pay for their university education.
Crude giveth and crude taketh away – and giveth again.
US-China Trade Agreement
U.S. and Chinese officials signed the phase-one trade agreement in January, way before the pandemic stuff unfolded. It was a noteworthy event because it suspended the trade war, although it did not remove all the tariffs that were instituted. Still, after 18 months of on-again, off-again contentious talks and American businesses and consumers bearing the brunt of interrupted commerce, it was a step in the right direction. As a result, Beijing imported a record amount of soybeans from the U.S. and opened its borders to American companies.
On the sixth day, President Trump said, “Let there be trade.”
Hello, Baby 2021!
It is challenging to envision 2021 being any worse than 2020. The Fed has already eased monetary policy. The federal government has spent trillions of dollars. The coronavirus vaccines are being distributed. The 2020 presidential election is complete. The last two giants of Old Hollywood – Olivia de Havilland and Kirk Douglas – perished. Hunter Biden already dropped off his laptop at the computer repair shop. If anything, 2021 could be an improvement from 2020, but that is easy to achieve when the bar is as low as the Seattle Mariners’ championship odds.
Read more from Andrew Moran.