Financial Year 20–21 in Retrospect — An Unprecedent Year
The genesis being the emergence of a crisis in 4th Quarter of FY-19–20; Jan — Mar 20:
January saw the emergence of Covid-19 whilst Global Equity markets were on a roll making new highs. February saw the rapid spread of Covid-19 infections and death across the globe and onset of the pandemic. March saw panic and fear of life translating into one of the sharpest corrections in financial markets. Equity markets corrected by 30% in 30 days. End of March Central Banks across the globe announced unprecedent aggressive monetary measures to provide liquidity and calm the markets Over the quarter equity markets were down 25%.
The Sensex had moved from 41,000 to 29,000.
April 2020 began with the world under a lockdown.
The once in a century health crisis, leading to lockdown, disruption of economic activity, layoffs, massive unemployment. India having amongst most severe restrictions on movements. In turn we saw a massive Monetary and fiscal interventions and stimulus by Governments and Central Bankers across the global to provide liquidity and stability. The financial markets responded positively to these interventions and over the first 6 months we saw the Equity markets recovering most of their losses. GDPs were contracting and stock markets were going up. Most commentators and investors were in disbelief, anticipating another correction.
Sensex moved up from 29,000 in March end to 38,000 by September end.
3rd Quarter: Vaccine Development and New Highs -
We saw human ingenuity coming together with remarkable cooperation for development of the Vaccine to fight the virus. The ability to treat the infected patients improved dramatically and economies started easing the lockdowns. Economies were expected to come back to pre-pandemic levels by FY 21–22 in spite of re-emergence of 2nd wave of infections in Europe.
Trump loses to Biden in a bitterly fought election. The development of Vaccines was announced in October and markets made new highs in November with the Sensex at 44,000.
4th Quarter: Vaccine Rollout and Interest rate reversal
A mammoth vaccination program was rolled out across the globe, while one saw emergence of 2nd phase in Europe. Biden takes charge as US President and rolls out another $1.9 Trillion fiscal package and is looking at another $ 3 trillion package, Corporate earnings have been better than expected with many positive surprises. With economy expected to stabilise based on reflationary policies, US 10-year yield almost in the quarter. The US 10 Year treasury yields moved from 0.90 bps to 1.75%.
The equity markets continued to make new highs but with greater volatility with the Sensex touching 50,000 and ending the year at 49,509.
LESSONS LEARNED DURING THIS UNPRECEDENT YEAR —
FY 20–21 has been one hell of a roller coaster ride and all of us experienced very unique challenges of dealing with lockdowns, social distancing and masking.
It taught us Life lessons :
As far as markets and investing are concerned it has only reinforced our beliefs:
FY 21–22 : LOOKING AHEAD
With the Year of the Pandemic behind us it may be useful to step back from the permanent chaos of political, economic and market events, and ask ourselves the following fundamental questions:
What am I investing for, and how will I know whether I’m succeeding or not?
How, indeed, does one even measure investment success?
The answers are not found not in today’s headlines — and certainly not by attempting to predict tomorrows. Nor will they be a function of whether the market’s next 20% move is up or down. You see, the answers you’re looking for can only be discovered by the light of your own personal financial situation.
In practice, they’ll depend on whether or not you are following — in exactly this order — the three fundamental steps to a genuinely successful lifetime of investing:
Goals — Plan — Portfolio.
You like most other investors might find this startling, as most people think successful investing is a function of whether or not their portfolio is outperforming some benchmark, or of getting in and out of the market opportunely.
However, considered properly, all portfolio issues are subordinate to the two vastly more important questions:
- Have you set specific goals?
And
2. Do you have a specific plan for achieving those goals in the time allotted? (for most of us, that will be our planned retirement date).
The great thing about this is the realization that the most important variables in investment success are within your control — as opposed to economic and market variables, which are beyond your control.
REMEMBER THAT :
All lastingly successful investing is goal-focused and planning-driven.
All failed investing is market-focused and current events-driven.
Successful investors act continuously on their lifetime plan;
Failed investors react continually (that is: randomly, episodically) to economic and market developments.
Article by:
Dhruv Mehta — Dhruv Mehta is Chairman at Sapient. His career spans over 30 years across multinational and Indian companies and is practising wealth management over the last 25 years. He is a Member of The Institute of Chartered Accountants of India and The Institute of Cost & Works Accountants of India.
