Financial markets and the economy in 2020

What a year this was! Going into 2020, financial markets were characterised by restrained optimism, as rate cuts in the preceding year had triggered a bull market in stocks and tightening credit spreads. Then came a turn of events that must be very close to the economic definition of an external shock.

At the end of January, the World Health Organization (WHO) declared a global health crisis due to a new virus that had appeared in China. A few weeks later it became clear that the fight against this virus would require drastic, comprehensive measures in all affected countries – which soon turned out to be more or less the entire world.

On March 12, the Norwegian government introduced the strictest measures ever in peacetime, banning a number of events, introducing limited quarantines, partial travel bans and much more. And Norway was by no means alone. Within a few weeks, more than half of the world’s population was subject to some kind of lockdown.

As investors quickly realized that this would have significant economic consequences, stock markets plummeted. In little more than a month, both the MSCI World Index and the Oslo Stock Exchange benchmark index fell by exactly 33 percent. The bottom was reached on March 23.

Now, be as honest as you can be with the benefit of hindsight: At that point, where would you expect the markets to be on New Year’s Eve?

More on the market and the economy this year.

2020 in a nutshell

Sources: Oslo Børs, S&P Dow Jones Indices, MSCI, Norges Bank, FactSet, IMF, SSB, SCB, Riksbanken, Pareto.