4 lessons from 2020 and what it means for expat investors in 2021
As we come to the end of an extraordinary year, we want to wish you the very best of Season’s Greetings, however you are celebrating this time of year and the launch into 2021. Thanks for being with us and we look forward to continuing into a hopefully brighter new year.
We thought it would be a good opportunity to reflect on the year and what it means looking ahead.
What 2020 has taught us about investment and financial planning
There were some key reminders in financial planning and investment management and events that reinforced our key principles:
Flexibility & Liquidity – we always maintain these are essential elements of financial and investment plans for expats in Europe. This year validated that. For many people, changes in circumstances highlighted the importance of possessing the flexibility to adapt your investments to the changing global economic environment and the liquidity to access your funds, without restriction, if needed.
Volatility – short and medium-term market volatility is a reality and 2020 reminded us to expect market movements. It reminded us to differentiate between short term movements and long term trends. This is a direct link to our third reminder, to focus on your goals. Whether the market is going up, down or sideways on any one day, if your investments are in line with your plan and you are still on track to achieving your goals, that is what is most important.
Expect Black Swan events – We named our business Black Swan Capital after this economic thesis, not because we can predict them, but so we can help our clients to prepare for them. A Black Swan event is an unexpected event, that was not foreseen, that has a major impact and has ‘retrospective predictability”. This means after the event people will often say they saw the warning signs, but never in advance. The confluence of the Covid-19 pandemic and its social, medical, economic and financial impacts, and the global oil crisis early this year can be considered a Black Swan. You can read more about Black Swan theory here.
Communication – 2020 reinforced the importance for us, throughout the year, of communication. We even won an excellence in business award for it! We have enjoyed very much speaking with the international community across Europe. We have strived to deliver relevant and timely information to keep you informed. We also particularly enjoyed all the one-on-one discussions and video calls; it’s true to say the best part of our job is speaking with our clients!
2021 – what to expect
As we look to the new year, we expect to see market volatility continue with two major factors impacting the financial market outlook in the next few months.
Vaccines – we have seen the barometer of economic outlook turn more positive since the announcement of the imminent arrival of vaccines in November 2020. The ability to deliver and give vaccines to the broader global populations and the effectiveness of them could have a notable impact in 2021. No one is expecting an immediate turnaround. The expectation is that it may permit global travel and boost global trade, required to accelerate economies after quarters of negative growth in 2020.
Geopolitical stability – this is considered a positive change in 2021 as the world appears to be moving towards a more predictable period with a more supportive attitude towards global trade. This is of course driven by the transition of government in the US, but it’s not all positive. There are still trade frictions, not least between China and a number of countries, and from the UK as they manage their position in the world post- Brexit.
In summary, we expect more of the same in the first half of 2021, which points to focusing on the long term. Re-assess your goals, make sure you are still aligned and on track to achieving them and avoid reactionary movements.
After a year like no other, we wish you all the very best, we hope you get a chance to rest and rejuvenate and we look forward to speaking with you in 2021. Happy New Year!
