FTSE 100: these were the five most critical days for UK investors in 2020

As 2020 began, few people would have predicted what trials and tribulations lay ahead. After a seemingly normal start to the year, the FTSE 100 index rose gently until the third week of January. Alas, this would be the 2020 peak for the Footsie. As weeks went by, a novel […]

As 2020 began, few people would have predicted what trials and tribulations lay ahead. After a seemingly normal start to the year, the FTSE 100 index rose gently until the third week of January. Alas, this would be the 2020 peak for the Footsie. As weeks went by, a novel coronavirus — later named Covid-19 and originating in Wuhan, China — spread across the globe. With people dying worldwide, stock markets crashed and economies collapsed. Here’s my timeline of the year, marked by the FTSE 100’s five most crucial days.

1) 17 January: the FTSE 100’s peak

The FTSE 100 closed at 7,542.4 on 31 December 2019. By 17 January, it had climbed by over 130 points (around 1.8%) to a closing high of 7,674.6. This was the blue-chip index’s 2020 high-water mark, reached after only a dozen trading days.

2) 12 March: the Footsie’s biggest one-day fall

On 9 March, the price of Brent Crude oil crashed by a quarter, but this didn’t caused the FTSE 100’s worst day in 2020. Three days later, on 12 March, President Donald Trump’s ban on most European flights to the US stunned investors. The main S&P 500 index dived by almost a tenth (9.5%), its worst day since the 1987 crash. On this side of the Atlantic, the FTSE 100 crashed§ by a ninth (10.9%), leaving investors stunned and shell-shocked.

3) 23 March: the FTSE 100’s low

As coronavirus kept spreading, investors capitulated, sold and ran for the exits. As risky assets, stocks and shares were particularly hard hit. On 23 March, the FTSE 100 collapsed to a 2020 closing low of 4,993.9 points. Just 83 days into the year and the Footsie had lost almost 2,550 points — more than a third (33.8%) of its value. This day marked the point of maximum pessimism and, as it turned out, the very bottom of the market meltdown.

4) 24 March: the Fed rides to the rescue

The Federal Reserve cut its main rate by 0.5 percentage points on 3 March. Alas, this did little to calm markets and the S&P 500 kept falling. Then the Fed fired an enormous ‘big bazooka’. On 23 March, Fed chair Jerome Powell announced that the US central bank would buy government bonds in unlimited amounts — and would buy corporate bonds (company debt) for the first time. As relief swept across global markets, the next day (24 March) saw the FTSE 100 leap by 9.1%, easily its highest one-day gain in 2020.

5) 9 November: V-Day (Vaccine/Value Day)

Just as VE Day and V-J Day were celebrated in 1945, V-Day will be remembered as the highlight of 2020. On 9 November, US pharma giant Pfizer and its German partner BioNTech unveiled a vaccine that was more than 90% effective in preventing Covid-19 infection. Within days, news of two other efficacious vaccines arrived. Thus, 9 November 2020 became V-Day: Vaccine Day.

For me, V-Day also stands for Value Day, because this was the day when high-flying tech stocks dived and old-school value shares soared. Indeed, one analyst claimed that the switch from growth to value stocks on V-Day was an eight standard deviation move — practically a miracle of probability. As a result, the FTSE 100 skyrocketed, soaring by 4.7% as investors scrambled to invest in economically sensitive sectors.

Today, on the final day of a tough year, the FTSE 100 closed at 6,460.52, down over 1,080 points — a seventh (14.3%) — in 2020. Even adding in, say, 3.3% for dividends leaves the index’s total return at minus 11%. Let’s hope 2021 brings better returns for shell-shocked UK investors. It should if they’ve taken advantage of the cheap share prices available this year!

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