While 2020’s opening months saw markets endure one of their harshest sell-offs on record, massive injections of stimulus from the world’s governments and central banks meant that many parts of the market ended the year in the black. 
Below, Trustnet reviews the returns of 2020 through several different viewpoints to show where the strongest gains and heaviest losses were felt in a year that few would want repeated.
Asset classes
While ‘volatility’ isn’t an asset class in the traditional sense, the below chart highlights just how turbulent 2020 was at times – with the VIX (known as ‘Wall Street’s fear gauge') rising 60 per cent over the year.
This was all down to the opening quarter, however, when stocks markets endured their sharpest crash on record as the coronavirus pandemic took hold and countries started to lock down their economies. The VIX jumped 315 per cent in Q1, before falling in each of the next three quarters.
Performance by asset class over 2020
Source: FinXL
Non-mainstream assets like Bitcoin aside (which was up over 300 per cent in 2020), gold was one of the best places to be after investors sought out the yellow metal amid a nervous market and massive money printing programmes by global central banks.
And despite the pandemic and a shutdown of economic activity, global equities ended up having a positive year with the MSCI AC World gaining 12.7 per cent thanks to huge stimulus packages from governments around the world.
Things were different in commodities, which suffered as demand dried up under lockdown. Oil had a particularly bad year, falling 37.1 per cent despite a Q4 rally. At one point in 2020, the oil price even went negative.
Geographies
The US and emerging markets – specifically China – were the market leaders by geography last year, with the UK being the clear loser.
Emerging markets ended 2020 slightly higher than the US. Asian countries tended to handle the coronavirus pandemic better than their peers in the west, due to past experiences with similar outbreaks. China was the first to lock down as the coronavirus pandemic started, but opened up sooner and has managed to secure stronger growth than other major economies.
Performance by geography over 2020
Source: FinXL
The US had a less robust response to the pandemic and suffered much higher infection rates than many other parts of the globe. However, US tech stocks – which saw demand jump during lockdown – led the market in 2020 and contributed to the S&P 500’s high returns.
At the bottom of the performance rankings was the UK, which was held back by its slow move towards a post-Brexit deal, a lack of tech stocks and a high weighting to under-pressure sectors like energy, resources and banks. The suspension of dividends from many companies also impacted the UK market, which was seen as a good hunting ground for income investors.
Investment style
Last year proved to be another when the quality-growth style of investing prospered and value lagged behind. That’s been the picture for much of the past decade.
In 2020, quality-growth companies held up better in the initial sell-off as investors preferred the relative safety they offered over more cyclical businesses. They also outperformed in the following rally as liquidity followed into the market from central banks and assets that can hold up in a low-growth world were favoured.
Performance by investment style over 2020
Source: FinXL
The value investing style, on the other hand, ended the year on a 3.4 per cent loss. The more cyclical names in this part of the market are more tied up with the fortunes of the wider economy, which didn’t look too great when vast swathes of the global population were put under lockdown.
However, value did rally towards the end of the year when the announcement of several effective coronavirus vaccines allowed investors to imagine a world where economies could start getting back to normal.
MSCI industries
Given that coronavirus lockdowns meant large numbers of people were forced to stay at home, technology companies saw a surge in demand as their products were used to work, socialise and shop remotely. ‘Coronavirus winners’ here included Apple, Microsoft and Paypal.
Consumer discretionary stocks also performed strongly. Among the largest constituents of the MSCI AC World Consumer Discretionary index are Amazon, which was a mainstay of lockdown shopping, and Tesla, which experienced a share price rise of 740 per cent in 2020.
Performance by MSCI industry over 2020
Source: FinXL
The clear loser of 2020 was the energy sector, with the index down more than 30 per cent. As mentioned previously, the oil price plummeted in 2020 as demand wilted because of lockdown and its travel restrictions.
FTSE market caps
The FTSE 100 was one of the worst-performing global markets in 2020, following a loss of more than 11.5 per cent.
As noted, the index is heavy in areas such as energy, resources and banks, which bore the brunt of the coronavirus crisis. At the same time, the index has very few members in the tech space.
Performance by FTSE market cap over 2020
Source: FinXL
UK small-caps fared somewhat better. Although the FTSE SmallCap ex Investment Companies index was hit harder by the Q1 sell-off – falling 32.4 per cent versus the FTSE 100’s 23.84 per cent slide – it rallied much faster than large-caps when investor sentiment was boosted during the second and fourth quarters.
Fund sector performance
Despite the challenges that 2020 created, most fund sectors generated a positive total return, on average, over the course of the year.
Performance by equity fund sector over 2020
Source: FinXL
The above chart shows the average return of the geographic equity peer groups. IA China/Greater China leads with a total return of 33.55 per cent, but three of its members – Matthews China Small Companies, Allianz China A-Shares and New Capital China Equity – were up more than 60 per cent.
As reported earlier this week, however, the best performer from the entire Investment Association universe resides in the IA North America sector – Baillie Gifford American, which made 121.84 per cent in 2020.
Performance by bond fund sector over 2020
Source: FinXL
When it comes to fixed income, government bond funds made the year’s best returns while risking parts of the bond market, like high yield and emerging market debt were less profitable.
This is largely down to government bonds rallying in Q1 on the back of safe-haven demand, while riskier areas sold off aggressively. Riskier sectors did have a much stronger run after the first quarter, as sentiment improved.
Performance by specialist, multi-asset and other fund sectors over 2020
Source: FinXL
The remaining Investment Association sectors, which includes those with specialist mandates or multi-asset approaches, also tend to produce positive returns, on average.
IA Technology & Telecommunications was the standout winner, however, owing to the fact that tech stocks were the main beneficiaries of 2020’s rollercoaster market conditions.