UK Equity Income props up the table, with cuts of 40 per cent from UK dividends being a key headwind.
Government bonds have had a great year – acting as a diversifier at a time when markets fell sharply. At the start of 2020, the 10-year gilt yielded 0.76 per cent, and today it pays 0.29 per cent.
A similar story is seen in the US, where the 10-year Treasury pays 0.84 per cent today and started the year offering 1.88 per cent. Is this surprising when central banks have been hoovering up gilts and treasuries at record levels?
Gold is another asset class that has had a strong run; $1,519 (£1,140) at the start of 2020 and $1,844 today, having closed above $2,000 in the summer. Safety assets have delivered.
Maybe a better judge of client performance are ARC PCI indices. The ARC Sterling Equity Risk index is up 2.34 per cent year-to-date; in fact all four ARC indices are positive in 2020.
The performance of equity markets this year bears no resemblance to the last big crisis – the global financial crisis. When Northern Rock hit the wall in September 2007 very few predicted the events to follow, with equity markets bottoming 18 months later in March 2009 and many barely back to pre-Northern Rock days until late 2010 (far longer in Japan’s case).
Quantitative easing was a new and unused tool in central bankers’ pockets. Contrast the speed and quantum at which QE has been used during this crisis and you have the key reason why markets are so sanguine and have rebounded so swiftly this year.
It took more than 10 years in the US to reach $4tn of QE; it has taken less than a year to double the amount again – the UK is a similar story. Rates were cut far quicker this time too, though clearly starting from a much lower base and therefore having less of an impact.
There is also far less caution now from politicians in using fiscal tools and running high budget deficits. Clearly with virtually unlimited money printing, running high budget deficits is far easier. To that end, policymakers learnt from previous errors and acted decisively.
Going back even further, Black Monday in October 1987 saw one of the biggest one-day drops in history, with markets taking 18 months or more to recover to prior levels.
The tech bubble was very different as the FTSE saw a long slow decline from the turn of the millennium until March 2003 – do not forget it took 15 years for the FTSE to surpass the previous peak in capital terms.
All crises are different. The drop in GDP this year could be described as voluntary, therefore the rebound was always going to be different and swifter as many simply could not spend, thereby building up a ‘war chest’.