2020 will go down in history for a number of reasons. One of these is the volatility of the world’s markets, due to a number of unusual and unprecedented events. But which events of the last 12 months really sent the financial markets reeling?
The US elections
On 3 November, Americans went to the polls in one of the most memorable elections in history. During the run-up to the elections, the dollar gained only to drop as the counting of votes continued. This was due to the contentious nature of the count and the fact it dragged on for several days, continuing to be disputed by incumbent President Donald Trump.
It is also believed that the performance of the markets themselves can impact the election outcome itself. Historically, there has been a relationship between the S&P 500 and who wins the race. In particular, S&P has an 87% success rate in predicting the winner as if stocks are high three months prior, the incumbent party is likely to win. It’s clear that market performance impacts the elections, and elections impact the performance of the market.
The death of Qassam Soleimani
At the start of January, the dollar and the price of gold jumped after the death of Iran’s top general, Qassam Soleimani, was announced. He was killed in a targeted airstrike ordered by President Donald Trump, which was regarded as a significant military success. Hours later, Iran struck US military bases in Iraq but there were no casualties.
The COVID-19 pandemic
The markets were doing well during the first quarter until it became apparent just how serious the COVID-19 pandemic was. Once the pandemic was formally declared, the world’s financial markets began to fall like dominoes, and stock markets hit a massive low on 23 March. Since then, the markets including stock, commodities, forex, and crypto, have been extremely volatile, reacting sensitively to any news related to the pandemic. The second wave, lockdowns, easing of measures, and vaccine news have all impacted the value of the dollar and other assets.
The Russia vs Saudi oil price war
The economic war between Russia and Saudi Arabia started in March of this year. Saudi Arabia initiated the standoff as a response to Russia’s refusal to reduce oil outputs in an attempt to keep oil prices stable. The ongoing conflict resulted in a huge drop in oil prices during the spring and contributed to the value of oil dropping to the negative in April. This triggered currency instability of the ruble against the dollar as well as a drop in the value of the dollar in general.
Negative oil prices
On April 20th, the price of US oil became negative for the first time in history. This meant that those producing oil were essentially forced to pay buyers to take it off their hands, rather than being paid. This came as a result of a significant drop in the demand for oil due to the world being on almost total lockdown for nigh on two months. A day later, the value became positive again but the damage had been done. Other markets, including forex, took a significant hit.
2021 looks to be uncertain as well. The swearing-in of the next US president and a possible COVID-19 vaccine are all set to get the year off to an interesting start.